Professional income upto 24 lakhs? -Submit this form to your employer to get full income without TDS.

Doctors, like other professionals, can opt for the presumptive taxation scheme under Section 44ADA of the Income Tax Act. This simplifies tax calculations by allowing them to declare 50% of their gross receipts as income. However, even under 44ADA, Tax Deducted at Source (TDS) provisions apply, often leading to deductions from their professional income. This article provides a comprehensive guide for doctors under the new tax regime on minimizing TDS, maximizing their net income, and efficiently claiming refunds, while also addressing Section 194J and related aspects, specifically considering the ₹12 lakh limit in the new budget assumption.

Understanding Section 44ADA and TDS for Doctors

Section 44ADA allows doctors (and other specified professionals) to declare 50% of their gross receipts as their income, simplifying income tax calculations. While this scheme offers ease of compliance, it doesn’t exempt them from TDS. Clients or hospitals making payments to doctors for professional services are obligated to deduct TDS under Section 194J.

Section 194J: TDS on Professional Services

Section 194J specifically deals with TDS on fees for professional or technical services. This includes payments to doctors for consultations, surgeries, and other professional services. The current TDS rate under Section 194J is typically 10% of the gross payment. This means that even if a doctor opts for 44ADA and their final tax liability is zero (especially relevant under the new regime with the ₹12 lakh assumption), TDS will likely be deducted.

The Impact of TDS on a Doctor’s Net Income

TDS directly affects a doctor’s net income. For instance, if a doctor receives ₹10 lakhs in gross receipts, TDS of ₹1 lakh (10%) will be deducted. While this deducted amount can be claimed as a credit against their final tax liability, it reduces their immediate net income. Effectively managing TDS is therefore crucial for maximizing take-home pay.

Strategies for Minimizing TDS and Maximizing Net Income (New Regime):

While completely avoiding TDS isn’t possible (as it’s the payer’s responsibility), doctors can take steps to minimize its impact, particularly within the context of the new tax regime and the ₹12 lakh income consideration:

1. Accurate Income Estimation and Form 15G/15H: This is a key strategy for minimizing TDS. If a doctor anticipates their total income (including presumed income under 44ADA and income from all other sources) to be below the basic exemption limit after considering the standard deduction available in the new regime, they can submit Form 15G (for those below 60) or Form 15H (for senior citizens) to the payer. This form declares that their income is below the taxable limit, requesting the payer not to deduct TDS.
   • How to use Form 15G/15H (New Regime): These forms are submitted to the payer (hospital, clinic, client) before they make the payment. Accurate estimation of income is crucial. Include all sources of income, including the presumed income under 44ADA (50% of gross receipts). Crucially, under the new regime, consider the standard deduction. If, after the standard deduction, your income is below the exemption limit, you can submit the form.
   • Example (New Regime): A doctor receives ₹24 lakhs in gross receipts. Their presumed income under 44ADA is ₹12 lakhs. They have other income of ₹2 lakhs, making their total income ₹14 lakhs. Under the new regime, they can utilize the standard deduction. If, after applying the standard deduction, their taxable income falls below the exemption limit, they can submit Form 15G/15H.
2. Maintaining Meticulous Records: Maintaining accurate records of all professional income and expenses is essential. This helps in accurately calculating income under 44ADA and reconciling TDS deducted with the actual tax liability. Proper documentation is crucial for smooth tax filing and refund processing.
3. Regularly Reviewing Income and TDS: Doctors should regularly review their income and TDS deductions throughout the financial year. If there are significant changes in income, they should inform the payers and revise their Form 15G/15H declarations, if applicable.

Claiming TDS Refunds Efficiently:

Even with careful planning, TDS might still be deducted. Doctors can claim a refund of this excess TDS while filing their income tax return. The process remains the same as described in the previous response: filing the ITR on time, reconciling TDS with Form 26AS, ensuring accurate bank details, and following up on refunds.

Professional Assistance:

Given the complexities of tax laws, 44ADA, and TDS, consulting a qualified Chartered Accountant (CA) or tax professional is highly recommended. A CA can provide personalized guidance on income estimation, TDS management, and ITR filing, ensuring compliance and maximizing net income. They can also assist with efficiently claiming TDS refunds.

Conclusion:

While TDS under Section 194J is applicable to doctors opting for 44ADA, proactive tax planning, accurate income estimation (including the use of Form 15G/15H, especially considering the standard deduction in the new regime), and efficient refund claiming can help maximize their net income. Maintaining meticulous records and seeking professional advice are essential for navigating the tax landscape and ensuring financial well-being. By understanding the nuances of TDS and taking appropriate steps, doctors can optimize their tax liability and focus on their professional practice.