Difference Between Income Tax Filing for Salaried vs Professional

Filing of income tax, or filing your Income Tax Return (ITR), is the activity through which an individual or organization reports their income, deductions, investments, and tax paid to the state for a financial year. In India, for instance, those earning beyond the basic exemption limit need to file an ITR under Section 139(1) of the Income Tax Act. The procedure is usually done through the Income Tax Department's e-filing website, where one can choose the appropriate ITR form, fill in their details, upload required documents, and file the return for verification

what is Income for salary individual

Income from salary means the aggregate amount of money drawn by an employee from an employer as a reward for his services. The income is constituted with various elements, both fixed and variable, and taxed in the "Income from Salary" category according to Indian taxation law.

what is income for professional

Professionals' income is that earned by self-employed individuals and those who provide specialized services—doctors, lawyers, architects, consultants, chartered accountants, and freelancers. It is taxed under the head "Profits and Gains from Business or Profession" according to Indian taxation norms

What is ITR

An Income Tax Return (ITR) is a document that Indian taxpayers need to file with the Income Tax Department, reporting their income, deductions, and taxes paid every year. It assists the government in following income earned by individuals and entities, ensuring proper payment of taxes, and enabling taxpayers to claim refunds when more tax was paid.

Which ITR form should file in salary individual

ITR-1 (Sahaj):

For those who receive income from:

• Salary or pension

• One house property

• Other sources (interest, etc.)

• Total income up to ₹50 lakh

• Not for business/professional income.

ITR-2

For salaried individuals with income over ₹50 lakh or income from:

• Multiple house properties

• Capital gains (e.g., on stocks, property)

• Foreign assets/income.

ITR-3

• ITR-3 Form is for Individuals and HUFs with income from business or profession who are not eligible to file ITR-1, ITR-2, or ITR-4.

• For individuals and HUFs with income from business or profession.

• Comprises income from salary, house property, capital gains, and other sources.

• Not for those choosing presumptive taxation under Section 44AD, 44ADA, or 44AE.

ITR-4 (Sugam)

• For individuals, HUFs, and companies operating under the presumptive taxation regime (Section 44AD, 44ADA, 44AE) with turnover of up to ₹75 lakh.

Why are choose Audit file

• Legal Requirement: Some taxpayers, like businesses or professionals whose turnover or gross receipts are in excess of certain limits, are compulsorily required by law to get their accounts audited under Section 44AB of the Income Tax Act.

• Verification of Accounts: An audit ensures that financial statements and the books of accounts are kept in accordance with the provisions of the Income Tax Act, thereby verifying income, deductions, and taxes reported accurately.

• Tax Evasion Prevention: Audit filings prevent tax evasion by ensuring proper disclosure and transparency of financial information to the taxing authorities.

• Ease of Assessment: Audited accounts facilitate easier assessment by tax authorities of the accuracy of tax returns and lessen the likelihood of discrepancies or mistakes.

Frequently Asked Question

1. What is presumptive taxation for professionals?

Presumptive taxation makes it easier to figure out taxes by letting professionals say that a certain percentage of their gross receipts (like 50%) is taxable income.

2. Do salaried employees and professionals pay tax differently?

Employers take taxes out of the paychecks of salaried workers. Professionals have to figure out and pay their own advance tax because TDS might not be taken out.