Counselling Fees Received By Medical Practitioner Will Be Treated As Income From Business

My daughter is a clinical psychologist and earned about Rs. 1.5 lakh last year through counselling. She also got a salary of Rs 60,000 per month for three months i.e., Jan-March 2022 on which tax was deducted. She has not filed her income tax return (ITR) yet. She has registered a private limited company in 2021-2022 where she is a director. The company had no income during 2021-22. Will it affect her status as a taxpayer? Which ITR form should she use for filing her ITR? Will there be any penalty for late filing of ITR? Can she seek a refund for TDS?

Answer: Her counselling income becomes taxable under the head “Profits and Gains of Business or Profession”, and so she has to file ITR 3.

As far as the income of Rs. 60,000 per month that she has received, that has most likely not been treated as salary. Had it been salary, the employer would not have deducted any tax on it, as the salary for the whole year is below the exemption limit, and in such cases, the employer is not required to deduct any tax on it. I feel the employer has treated your daughter as a consultant, and has accordingly deducted tax at 10 per cent. So, these monthly payments would also become taxable under the head “Profits and Gains of Business or Profession”.

For ascertaining the exact position, you may refer to the appointment letter given to your daughter. Additionally, you can check the tax details in her Form 26AS and/or AIS, which you can download from the income tax department website to ascertain how the payments have been treated by the payer of the money.

In case, the employer has treated your daughter as an employee, the amount received would be taxable as salaries and she would be entitled to a Standard Deduction of Rs. 50,000 from the salary received.

If a person misses the due date for filing of ITR, a mandatory late fee is levied by the income tax department at the time of filing of the ITR. However, she will not have to pay any late fee for having missed the due date of July 32, 2022, if the aggregate of her income from all the sources does not exceed the basic exemption limit of Rs. 2.50 lakh. In case it exceeds Rs. 2.50 lakh, but does not exceed 5 lakh, she will have to pay Rs. 1,000 as late fee. If it exceeds Rs. 5 lakh, she has to pay Rs. 5,000 as late fee.  Please note that she has to file her ITR by December 31, 2022.

She can also claim the refund of taxes deducted, if the TDs amount is more than the tax liability. Just because she is a director in a private company will not change her status as a taxpayer except that she cannot use ITR 1 even if she is eligible to do so otherwise.

What will be the tax implications if a karta gifts Rs. 1.5 lakh to the Hindu Undivided Family (HUF), which the HUF invests in equity-linked savings scheme (ELSS)?  Will there be a tax liability for the karta?

Gifts received from certain specified relatives are fully tax-free, and a member of the HUF is covered within the definition of the specified relative. So, there will not be any tax implication for the HUF at the time of receipt of the money.

The HUF will be able to claim deduction under Section 80C of the Income-tax Act, 1961, for investments made in ELSS. However, according to Section 64 of the I-T Act, 1961, the clubbing provision will apply in respect of the income which is generated from the asset transferred by a member to its HUF.

Please note that the clubbing provision is not a one-time process, but a continuous process, and such income will continue to be clubbed with the income of the karta as long as the HUF continues even when the ELSS investment is redeemed and reinvested in any other asset.

The author is a tax and investment expert

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)