ITR filing for Lawyers - A Complete guide
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Welcome Lawyers, to our guide on filing Income Tax Returns (ITR). As legal professionals, you often navigate complex legal laws, but income tax compliance can sometimes feel like a mystery. Fear not! In this guide, we’ll break down the process of ITR filing for lawyers into simple steps, ensuring you meet your tax duties smoothly.
Understanding ITR Filing
Before diving into the process, let’s grasp the importance of ITR filing for advocates. Whether you’re a practicing lawyer or a legal consultant, filing your ITR accurately and timely is crucial. It not only ensures compliance with the income tax act but also helps in maintaining financial transparency and credibility.
Taxation of Practicing Lawyer
Practicing lawyers, by virtue of actively engaging in legal services, fall under the category of individuals carrying on a “Profession” for taxation purposes. As such, their income is taxable under the head “Profits and Gains from Business or Profession” as per the Income Tax Act.
However, there’s a significant provision under section 10(2A) that provides relief to practicing lawyers who are partners in law firms and receive a share of profits from such firms. This provision exempts the profits received by the practicing lawyer from tax in their hands.
Conditions for Exemption:
For this exemption to apply, two conditions must be met:
Partnership in Law Firm: The practicing lawyer must be a partner in one or more law firms.
Share in Firm’s Profits: The practicing lawyer should receive a share in the profits of the law firm(s) where they are a partner.
Rationale behind the Exemption:
The rationale behind this exemption lies in avoiding double taxation. The profits earned by the law firm have already been subjected to tax at the firm’s level. Taxing these profits again in the hands of individual partners (practicing lawyers) would result in double taxation, which is inequitable and can discourage partnership structures within law firms.
Taxation of Non Practicing Lawyer
Non-Practicing Lawyers Receiving Professional Fees:
Some non-practicing lawyers may engage in advisory services or consultancy work, for which they receive professional fees. In such cases, even though they are not actively practicing law in the traditional sense, they are still deemed to be carrying on a “Profession” for taxation purposes.
As a result, the income earned by these non-practicing lawyers from professional fees is charged to tax under the head “Profits and Gains from Business or Profession” as per the Income Tax Act. Similar to practicing lawyers, they are required to maintain proper books of accounts and adhere to other tax compliance requirements applicable to professionals.
The rationale behind taxing professional fees earned by non-practicing lawyers under the head of business or profession is to ensure consistency in the tax treatment of similar income sources. Regardless of whether the lawyer is actively practicing or providing advisory services, the income generated from their professional expertise is subject to taxation under the same category.
Non-Practicing Lawyers Receiving Salaries:
Non-practicing lawyers who are employed by law firms, corporate entities, government agencies, or any other organizations and receive salaries are treated akin to any other salaried employee for tax purposes. Their income is charged to tax under the head “Income from Salaries” as per the Income Tax Act.
Documents required for ITR filing for Lawyers
- PAN Card
- Income and expense details (if practicing lawyer)
- Form 16 (if salaried)
- Bank statement
- 26AS
- AIS/TIS
- Investment proofs if claiming deduction under section 80C
- Any other relevant document
ITR filing process
Step 1: Gather Necessary Documents as mentioned above
Step 2: Choose the Right ITR Form
As lawyers, you typically fall under the category of professionals. Hence, you’ll likely file ITR using Form ITR-4 (Sugam) or Form ITR-3, depending on your income sources and business structure.
Step 3: Fill in the Details
Now comes the heart of the process – filling in the details. Ensure you input accurate information regarding your income, deductions, and tax payments. Double-check to avoid any errors that might lead to complications later on.
Step 4: Claim Deductions
Wisely As legal professionals, you’re entitled to various deductions under Section 80C (like investments in PPF, LIC, etc.), Section 80D (health insurance premiums), and Section 80G (donations). Claim these deductions wisely to minimize your tax liability.
Step 5: Submit and Verify
Once you’ve filled in all the required details and submitted the ITR, it’s time to verify your return. You can do this electronically using Aadhaar OTP, Net Banking, or by sending a signed physical copy.
Step 6: Keep Records
After filing your ITR, maintain copies of the filed return, acknowledgment receipt, and supporting documents for future reference. These records are essential for income tax notice.
Income tax slab for Lawyers below 60 years (Old Regime)
| Income | Tax rates |
| Less than Rs.2,50,000 | 0% |
| Rs.2,50,000 – Rs.5,00,000 | 5% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
Income tax slab for Lawyers below 60 years (New Regime)
| Income | Tax rates |
| Less than Rs.3,00,000 | 0% |
| Rs.3,00,001 – Rs.6,00,000 | 5% |
| Rs.6,00,001 – Rs.9,00,000 | 10% |
| Rs.900,001 – Rs.12,00,000 | 15% |
| Rs.12,00,001 – Rs.15,00,000 | 20% |
| More than Rs.15,00,000 | 30% |
Income tax slab for Lawyers between 60 & 80 years (Old Regime)
| Income | Tax rates |
| Less than Rs.3,00,000 | 0% |
| Rs.3,00,001 – Rs.5,00,000 | 5% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
Income tax slab for Lawyers above 80 years (Old Regime)
| Income | Tax rates |
| Less than Rs.5,00,000 | 0% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
Conclusion
Filing Income Tax Returns can seem daunting, but with the right guidance, it’s a manageable process. As lawyers, staying compliant with tax laws is not only your obligation but also a testament to your professionalism. By following the steps outlined in this guide, you can navigate the ITR filing process smoothly and focus on what you do best – lawyering for justice!
Remember, timely and accurate ITR filing not only ensures legal compliance but also contributes to the smooth functioning of our financial system. So, let’s embrace tax compliance as part of your professional responsibility.
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FAQ (Frequently asked Questions)
1. What is Income Tax Return (ITR) filing, and why is it important for advocates?
ITR filing is the process through which individuals declare their income, deductions, and taxes paid to the government. For advocates, it’s crucial because it ensures compliance with income tax act and maintains financial transparency.
2. Which ITR form should lawyers use for filing their taxes?
Advocates/ lawyers typically use Form ITR-3 or Form ITR-4 (Sugam), depending on their income sources and business structure. Form ITR-3 is for individuals and HUFs (Hindu Undivided Families) with income from business or profession, while Form ITR-4 is for individuals, HUFs, and firms (other than LLPs) having income from a business or profession opting for presumptive taxation scheme.
3. What documents are required for ITR filing as an advocate?
Advocates need to gather documents such as income details from legal services, rental income (if any), expense records, Form 16/16A (TDS certificates), bank statements, and any other relevant documents showing income and deductions.
4. Can practicing lawyers claim deductions while filing ITR?
Yes, practicing lawyers can claim deductions under various sections of the Income Tax Act, such as Section 80C (for investments like PPF, LIC, etc.), Section 80D (for health insurance premiums), and Section 80G (for donations), among others.
5. Are there any exemptions available for practicing lawyers who are partners in law firms?
Yes, under section 10(2A) of the Income Tax Act, profits received by practicing lawyers who are partners in law firms and receive a share of profits from such firms are exempt from tax in their hands, provided the profits have already been taxed at the firm’s level.
6. How can advocates verify their ITR?
Advocates can verify their ITR electronically using methods like Aadhaar OTP or Net Banking, or by sending a signed physical copy.
7. What records should advocates maintain after filing their ITR?
Advocates should keep copies of the filed return, acknowledgment receipt, and supporting documents such as TDS certificates, expense records, and income statements for future reference. These records are essential for any queries from the income tax department.
8. Is there any penalty for late filing of ITR by advocates?
Yes, if advocates fail to file their ITR by the due date (usually July 31st of the assessment year), they may be liable to pay a penalty under Section 234F of the Income Tax Act. The penalty amount varies based on factors like total income and the delay in filing.
9. Can advocates revise their ITR after filing it?
Yes, advocates can revise their ITR 31st December if they discover any errors or omissions in the original filing.
10. Where can advocates seek assistance or clarification regarding ITR filing?
Advocates can seek assistance from tax professionals, chartered accountants, or utilize online resources provided by the Income Tax Department, such as FAQs, tutorials, and helpline services, for any clarification or assistance related to ITR filing.
11. What is the due date of ITR filing for lawyers and advocates?
31st July for non audit cases and 31st October for audit cases.
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