As per the new change in Tax law, every aop/firm will pay tax thus file return. Income earned which are not disclosed may not be nemore find shelter of confedentiality. A tax clerk of tax circle may show u return of even big ones. Lets see.
I don't think its a big change. Earlier partners had to file income tax returns disclosing there share from the AOP.
Dears,
The tax liability of small practices was not and is not expected to bring bigger tax consequences as the earnings were probably falling in lower slabs in the hands of partners and now, when the firms would be taxable, it would again not result in huge tax payments.
The deduction of tax at source at 6% is the final discharge of tax liability, after the amendment in Finance Act 2007.
As far as bigger practices are concerned, in my view, the 6% of turnover would probably have lesser incidence of tax on partners, as the share in their hands would not be taxable that was almost subject to tax at 25% earlier on.
I think the normal net margin in consultancy and audit assignments as an average would not be lesser than 40 %. (I know it is normally not more than it). Taking the figure of Rs 100, we can check the incidence of tax in both models
In earlier situation
Turnover Rs. 100
Profit Rs. 40
Rate (normally in big practices 25 % rate is the applicable rate) 25%
Tax amount Rs. 10
In present situation
Turnover Rs. 100
Rate of tax as final liability 6%
Tax amount Rs 6.
However, above is only an analysis on certain assumptions. The actual situation could only be estimated through sensitivity analysis.
In my view, the new scenario will give benefits to professionals.
Regards,
Kamran.
My opinion is also the same that new taxation beneficial to partners of the firm
Regards
Imran