Tax Pills for Medicos - Professional Income (Phase 1)

Doctors are our saviours. They receive professional fees from patients or through the hospital as consultancy or surgeon's fees. This article explores the concept of direct taxation on professional income and whether doctors are required to maintain accounting records.

Firstly, doctors should be aware of the following principles

If the gross receipts (turnover/billings) are INR 75L or more, a tax audit is applicable. A Chartered Accountant will have to sign off on the tax audit report and report whether the expenses claimed by you are true and fair. Your CA will ask you for backup papers (evidence) to support your claims. If you buy a loan to buy any medical instruments, you can claim that interest as a professional expense.

You can claim expenses which are incurred in the course of providing your medical services, such as depreciation on vehicles, conveyance, staff salaries, payment of professional fees, and indirect taxes paid for the purpose of your work. Except for plastic surgeons, GST does not apply to any medicos as long as they are into only this profession.

Therefore, if you are paying for any expense with GST, that GST portion can be claimed as a professional expense. 

What if you are a partner in a Firm or LLP while practising medicine? In that case, you can receive remuneration, interest on capital and profit/loss share from the Firm or LLP.

Presumptive taxation: A doctor can offer 50% of gross fees (receipts) as his professional income. The expenses incurred are deemed to have been claimed. Ideally, the doctor should maintain the list and amount of total expenditure and find out the % of profits on the gross receipts. If that is higher than 50%, that very % should be applied to the gross receipts.

If you have crossed fees INR 50L in any previous year (Financial Year April to March), and you have received 5% of those total fees in cash, then you are not eligible for presumptive taxation.

TDS (Tax Deducted source) is applicable either if you are earning a salary or if you are professionally hired by the hospitals on a contract. This tax can be claimed as a credit against your tax payable towards the year-end and also utilised while paying quarterly advance tax.

Advance tax shall be applicable if the total tax estimated is INR 10,000 in the financial year. You should pay your advance tax, and possibly, while filing the return, save interest/claim refund, as the case may be.

You need to withhold tax at source on payments like professional fees to your junior doctors, legal and finance consultants, rent for office/home, and contractors as applicable.

Just as a doctor is required to maintain a healthy physique and mind, similarly, finance is the blood to your way of living. A professional chartered accountant should always be consulted and supported when questions are asked.

Your due dates are as follows:

1. ITR if applicable to tax audit: 31st July of next FY (unless extended date by FM)

2. Tax Audit Report: 30th September of next FY

3. ITR for (2): 31st October of next FY

4. TDS: 7th of next month/30th April for March deductions/collections

5. Advance Tax: 15th of June,15th of Sept, 15th of Dec, 15th of March, 31st of March

6. GST for plastic surgeons - due dates vary (not covered here)

7. TDS return: 31st July, 31st October, 31st January, 31st May (for Jan to March deduction)