Tax liabilty for cheque payments -help

Tax queries 174 views 5 replies

Dr.Jyothish Vijay

214 Points Joined July 2010

I am a doctor(a professional) receiving primarily professional fees and i regularly make use of 44 ADA for my tax purposes. I make use of the "cash" method of accounting where i pay taxes for the fees i receive based on the time of actual receipt.

eg: for the work done in the month of march 3018, i receive payment in April 2018 and pay tax for the amount i receive in the next financial year only (ie FY 2018-2019).

But now a confusing thing as come up. I receive payment for companies (under section 194 J) for the technical advices i give them and the studies i conduct for them. These amount to only a small fraction of my total receipts-but i do get such receipts

Now for a work i did in FY 2018-2019, suppose the company issues a cheque in my name in March 2019. They will cut 10% TDS under section 194J in mArch. This will come in FY 2018-2019. It will show up in my 26 AS in FY 2018-2019. But this cheque has to then come by post and i may receive it only at the end of March 2018 or maybe early April 2019. In any case i think i will be presenting the cheque to my bank in April 2019 only

My query is...can i present the amount i received as if received in FY 2019-2020? (which is the truth really in my case). Do i need any proof to show that i received the cheque only in April 2019. ? Will the date of amount credited in my bank (as evident from bank records) be proof enough? Will the dsparity between TDS and my payment of tax falling in two FY be a problem for me?

Let me also clarify...i am not looking for a "safest approach". I simply want to know whether what i intend to do is legal and the correct way to do it legally

Replies (5)

CA Ankur Mehan

119 Points Joined October 2018

Sir,
when a company deduct TDS on ur account then u have to show that receipt in that particular year,
1.There is problem in not showing that there is mismatch in 26AS,,. and dept will serve notice regarding this.
2. That hospital issue chq dated in march. then u cannot say that this receipt is of April month.

3. u have to take credit of TDS deducted in ur return then how is that possible that u do not take income.

So my professional advice is always consider ur 26AS before filling your return and take all income in return whose TDS is shown in 26AS.

as u file under 44ADA, dept cannot demand for books of accounts so u can consider in april also..
But...... Being professional my advice is always do as per correct way.

Dr.Jyothish Vijay

214 Points Joined July 2010

"2. That hospital issue chq dated in march. then u cannot say that this receipt is of April month."

First of all the person issuing the cheque here is a pharma company (for conducting a CME for them). I am a doctor working in South India receiving professional fee from my hospital, which is my main income. The income from pharma compnay is only a side income, but still is counted as professional fees ! Now the company is located in Delhi. They will issue cheque. t comes by post to regional offices, then from there to sub regional offices and finally an employee (who visits my hospital in a monthly basis) personally hand over me the cheque. There has been instances where there was upto 21/2 months delay between date on cheque and the date on which i receive the cheque!!!! So my view is that practically, ie in real life scenarios such delays are common.

I believe the date of receipt of cheque is the one important for me. The company could show "expenses" in FY 2018-2019. But i, who follow a cash system of accounting should be paying tax on the basis of "date of receipt"

Dr.Jyothish Vijay

214 Points Joined July 2010

Anymore suggestions-anyone?

Dr.Jyothish Vijay

214 Points Joined July 2010

See...I consulted a CA regarding this. He says to encash the cheque only in April. And that it is possible to not claim the TDS which will appear in my 26 AS this FY. He says instead of claiming this year, it is possible to push the TDS to next year and claim it then!!!