What are the Tax Compliances  for Doctors

Many of the professional doctors nowadays starting the practice in the field of medical sciences.for which they have to maintain certain books of accountsa also,

Here we discuss Section 44AA fo maintenance of books of accounts:

Section 44AA mandates the maintenance of books of accounts for the medical professionals for Income Tax purpose.

The Doctors whose Gross Receipt/Collection exceed  ⇒ Rs. 1.50 Lakhs per annuam.

Books required to maintain for those whose gross receipt = RS.1,5 Lakhs per annum

• Cashbook –Records of day-to-day cash transactions, showing the cash balance at the end of each day or each month
• Journal –Logs of daily accounting transactions
• Ledger –Recording all entries from the journal for preparing financial statements
• Copies of bills –Serially numbered photocopies of invoices issued for amounts more than Rs. 25
• Original bills –Receipts of all expenditure incurred and bills received for sums over Rs. 50
• Payment vouchers duly signed –In the absence of relevant invoices or receipts for expenses less than Rs. 50

Other than the books of accounts, a medical professional should keep and maintain the following documents:

• A daily cash register in Form No. 3C listing details of patients, service provided, fees received with receipt date
• Inventory of drugs, medicines, and other consumables you use for your profession, as on the first and the last day of the previous year

Will non maintenenace of books attract the penalty?

Yes, non-maintenence of books will attract the Penalty of Rs. 25, 000.

For how much time the books are required to be kept?

You must keep the documents for eight years after the relevant assessment year.For examplle presently we are filing ITR for FY 2020-21 AND AY 2021-22 So we have to maintain books of accounts till year 2029-30.

Audit: 44AB

If practicing doctor is having gross fee collection of Rs. 50, 00,000 (Fifty lakhs)or more during the previous year (April to March), then books of accounts should be audited by a Chartered Accountant in Practice.

IS there any penalty for not performing audit??

Penalty for non-complying with tax audit is Rs.1,50,000 or 50% of gross receipt whichever islower. 

Due Date:-

 Non Audit Case: 31^stJuly of the assesment year

 Audit Case: 30^thSeptember of the assesmen Year

What is Presumptive Tax Scheme for Professionals (Section 44ADA??

This facility of Presumptive taxation for professionals has been introduced by Finance Act, 2016.

• Available to Resident individuals and HUF.
• Annual Receipts of Rs 50lakhs or less can opt .
• Who opted do not have to compute or report actual profits.
• Can assume profits to be 50% of the receipts.
• But if claimed profits lower than 50% of receipts and total income is taxable i.e. it exceeds Rs 2.5 Lacs in such a situation, one will have to maintain books of accounts and get them audited as well.
• Not required to pay advance tax in instalments; paying entire tax dues by 15th March of the financial year will sufficient.
• Advantage of opt in one year and opt out in further following years.

WHAT ALL WILL BE INCLUDED IN THE INCOME TAX RETURNS OF DOCTORS...??

The Income tax return must include income earned from all sources. This includes income earned from practice, any rental income, income from fixed deposits and savings accounts and income earned from sale of any shares or property, called capital gains. There are 2 ways to calculate income from THE practice. Either consider it like a business activity and deduct actual expenses from actual receipts to calculate its profit and loss and pay tax on it. Or opt for presumptive taxation. Once your income is calculated from all sources, you can claim reduce your taxable income by claiming deductions under section 80 and pay tax on the remaining income.

Which tax return they need to file?

For presumptive income ITR-4 is applicable. In this form income from one house property, salary income can also be reported. However, if you have any capital gains income or you own more than one house property, you cannot file this form. You will have to file ITR-3

Will the Health Care services Taxable under GST??

India is the largest producer for generics. Country’s Pharmaceutical Industry is currently the 3^rd largest in the world in terms of volume and ranks 14^th in terms of value. As the population continues to grow, the need for better Healthcare Services is also growing. Currently, 5 percent of the country’s GDP is spent on the Healthcare sector.

Most healthcare expenses are paid out of pocket by patients and their families, rather than by the Government. However, the Government of India has slightly minimized the burden on medical expenditure by way of exempting such expenses from levy of Taxes.

So in the GST tax regime health care services are exempted from taxes.

“Healthcare Services by a Clinical Establishment or Authorized Medical Practitioner or Para medics are exempt from Goods and services tax”

For understanding the exemption, we need to understand below important terms used in the above statement:

1. Health care services
2. Clinical establishment
3. Authorized Medical Practitioner
4. Paramedics

1. Health care services :

any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include – hair transplant or cosmetic or plastic surgery.

2. Clinical establishment :

Clinical establishment means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India.

3. Authorized medical professional:

• Practitioner should be registered with any medical council;
• Practitioner should have requisite qualification to practice;
• Such qualification should be of any system of medicine recognized in India.

Recognized medical system in India are : Allopathic , Ayurveda ,Siddha, Unani, Homeopathy, Yoga & Naturopathy.

4. Paramedics:

These are trained healthcare professionals such as nursing staff, physiotherapists, technicians, lab assistants etc. They are accountable for their services when provided independently and therefore exempt

Other Exemptions :

(i) Services provided by veterinary doctors: exempts services in relation to health of animals and birds from GST.

(ii) Blood Banks: Cord Blood Banks include other Blood Banks and thus the services provided by Cord/Other Blood Bank for preservation of stem cells are  Exempt from GST.

(iii) Ambulance Services: Providing of ambulance services are also exempt from the ambit of GST.

 (iv) Medical Tests: Medical Test (either done in own Clinical establishment or done in the separate clinical establishment setup specially for such test)  are Exempt. any GST.

 (v) Room rent for patient  : Rent charged for rooms for patients are not taxable under GST. However, if the hospital is renting space for a chemist shop or providing rooms on rent for care takers, then that would attract GST.

(vii) Services provided by hospitals under health care service are naturally bundled services and exempted under GST Act