Income for Advocates can be from 2 modes namely:
1.Salary income from employer wherein the Advocate has been employed by a organisation/entity.
2.Professional services income.(Proprietorship, Partnership, and a company)
1.Salary income from employer where in the Advocate has been employed by a organisation/entity.
a)For individuals who are employed as a employee and having a employer and employee relationship there is no need to maintain any books of accounts.
b)TDS will be deducted for the employees under section 92B under income from head salary.
c)Filing of income tax return under section 139(1) would suffice the compliance requirement for the individual as a employee
2.For Lawyers who render professional services as a consultant or maintain their own establishment.
a)Books of accounts are to be maintained as per the 44AA of the income tax act 1961 in the following cases
I)where the gross receipts from the specified profession exceed Rs. 1,50,000 in any of the 3 years immediately preceding previous years relevant to current previous year, or not likely to exceed Rs 1,50,000 in the current previous year.
Following books of accounts need to be maintained as per section 44AA
1)All bills in original for those exceeding the amount of Rs 50 per bill
2)All bills as a carbon copy if amount exceeding Rs25
Deductions available for Lawyers as expenditure
1)All direct expenditure viz, salaries paid to Lawyers who are employed as a junior lawyers.
2)Maintenance expenditure relating as housekeeping expenses even form a substantial part of the expenditure.
3)Indirect expenditure such as to administrative staff salaries, payment to parking and rent of the building if the building is taken on lease.
b) Presumptive income applicable for the Lawyers under section 44ADA
1)As per the new amendment in the finance act 2016 a new concept of presumptive income is applicable to the Lawyers in the following cases.
i)For the Lawyers whose form of business if in the nature of sole proprietorship, Partnership, or HUF, if the total gross receipts in the previous year done not exceed Rs. 50,00,000, there is no requirement of filing tax audit report for the said business, provided the rate of income declared on such presumptive income is not less than 50% of the gross receipts
ii)No books of accounts are required to be maintained under section 44ADA
iii)income shall be declared @ of 50% on the total receipts/ turnover in the relevant previous year.
iv)However Advance tax has to be paid even for such professionals in one instalment which shall be 15th march of the relevant previous year.
3.Deductions available for Lawyers as per Income Tax Act
a)A lawyer as an individual can claim deduction of Life insurance premium paid, Tuition fees to children(Up to a maximum of 2 Children), Fixed deposit, Investment in mutual funds, Investment in public provident fund, etc up to a maximum of Rs.1,50,000 per annum.
b)A lawyer as an individual can claim deduction if any amount is paid for medical and health insurance policies of self, spouse, parents, children to a maximum amount of Rs.25,000, if the individual lawyer is a senior citizen aged 60 years or more the deduction will be Rs.30,000