The ₹24 Lakh Income, Zero Tax “Hack” Professionals Are Missing!
Imagine earning ₹24 lakh a year and paying absolutely no income tax. Sounds too good to be true? Chartered Accountant Meenal Goel says it’s 100% legal, thanks to a powerful, yet often overlooked, provision in the Income Tax Act: Section 44ADA.
This isn’t about complex deductions or proving every expense. Section 44ADA offers a simplified “presumptive taxation” scheme specifically designed for professionals like doctors, lawyers, architects, consultants, and CAs.
Here’s the brilliant simplicity of it:
- You’re taxed on just 50% of your professional income. So, if your gross receipts are ₹24 lakh, your taxable income is automatically deemed to be a mere ₹12 lakh.
- No expense proof needed! Section 44ADA assumes 50% of your income covers your business expenses. You simply report your total receipts, eliminating the hassle of maintaining extensive books of accounts or undergoing audits (as long as you stick to this method).
The Math That Makes It Zero Tax (under the new tax regime):
Let’s break down the numbers for a ₹24 lakh income:
- Gross Receipts: ₹24,00,000
- Deemed Taxable Profit (50% under 44ADA): ₹12,00,000
- Tax Liability (on ₹12 Lakh under new regime): ₹63,000 (calculated as per new tax regime slabs)
- Section 87A Rebate: ₹63,000 (For resident individuals, up to ₹63,000 rebate if taxable income is ₹12 lakh or less)
- Net Tax Payable: ₹0
What’s the Catch? (The Legal Nuances):
This “golden tax hack” hinges on a couple of important rules:
- Gross Receipts Limit: Your total professional receipts must not exceed ₹75 lakh in a financial year. This limit was recently increased from ₹50 lakh, provided at least 95% of your receipts are digital (bank transfers, UPI, etc.).
- Eligible Professions: You must fall within the “specified professions” as recognized by the Income Tax Act.
- Entity Type: This regime applies only to individuals and partnership firms, not LLPs.
A Crucial Reminder:
While income tax might be zero, remember that GST registration becomes mandatory once your professional receipts cross ₹20 lakh, regardless of your income tax setup.
The Bottom Line:
If you’re a qualifying professional operating with lean expenses, Section 44ADA, especially when combined with the benefits of the new tax regime, is an incredible opportunity to significantly reduce or even eliminate your income tax burden. It truly is a tax hack every professional should be aware of!