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tax filing for lawyers

Tax Filing for Lawyers

Last Update Date : September 10, 2018

tax filing for lawyers

Going through a law book is not a difficult task for a lawyer, who is used to reading and absorbing the various laws pertaining to each field and applying them to the relevant case, as needed. So, it should come as no surprise to lawyers that when it comes to filing his/her tax return, that different taxation laws will be applicable as per the profession. Let’s look at how tax filing for lawyers differs.

Income Sources for Lawyers

Lawyers, starting out or veterans can earn their income in two ways, each of which is subject to different taxation laws:

Law Firm

If an individual is on the full-time payroll of a law firm, then he/she is treated as a salaried individual and is subject to regular taxation laws and can avail of deductions u/s 80C – 80U by submitting the related proof to the employer. However, if he/she is a contractual employee working for a law firm, then he/she will be treated as a professional and will be required to file a business return and their income will be taxable under the head “Profits and Gains of Business or Profession.

Practice

For lawyers practicing with their own practice, they fall under the category of “Income from Profession”. Professionals can take advantage of the Presumptive Taxation Scheme, which is discussed below.

Presumptive Taxation Scheme for Lawyers

The Presumptive Taxation Scheme allows professional such as lawyers, having gross receipts of less than Rs 50 lakh per annum, to avail this scheme and pay tax on only 50% of the gross receipts earned during the year, i.e. the net income will be 50% of the gross receipts and all the expenses including depreciation shall be deemed to have been deducted. However, if the scheme is opted then it must be opted for a continuous period of five years, else it will not be available for the next consecutive five years.

Benefits of Presumptive Tax Scheme for Lawyers

In addition to being taxed at a lower income bracket, lawyers also do not need to maintain detailed books of accounts and get it audited u/s44AB. Also filing of income tax return becomes simple by using ITR Form 4(Sugam). Moreover, the advance tax payment shall be made in one installment by 31th March rather than four installments as applicable to others.

Book of Accounts for Lawyers

For lawyers who have not opted for the Presumptive Taxation Scheme, books of accounts need to be maintained, as per section 44AA if the gross receipts exceed Rs. 1,50,000 in any one of the three years immediately preceding the previous year or where the profession is newly set up in the previous year, if the gross receipts exceed Rs.1,50,000 for that previous year. A lawyer must maintain the below mentioned documents in his/her book of accounts:

  • Original bills above Rs 50
  • Carbon copy bills above Rs 25
  • Ledger, Cashbook, Journal

Deductions Allowed for Lawyers

For lawyers belonging to the “Income from Profession” category, the following deductions can be availed of:

  • Depreciation on the asset used for profession
  • Stationery (paper, pencils etc.)
  • Salaries paid to other employees
  • Office rent paid
  • Attended conference/seminars fees
  • Charges for internet and telephone
  • Housekeeping and other maintenance expenses
  • Other expenses directly or indirectly connected with your profession
    Portions electricity etc. can be claimed as expenses if working from home Tax Audit and Foreign Income Source

A tax audit must be conducted by all professionals including lawyers, having gross receipts over Rs 50 lakh per annum.

For lawyers who provide legal services in India, but are settled in a foreign country, he/she must file taxes in India on the income accrued and earned in India.

When to File Taxes?

The due date for filling income tax return for lawyers who are required to get their books audited u/s 44AB is September 30th. For lawyers who have opted for presumptive scheme or and are not required to get their books audited he/she must file his/her income tax return by July 31st. .

How H&R Block Can Help You?

While learning about various laws is an easy thing for a lawyer, your time is better spent learning about the various laws pertaining to the various cases you may be working on, to increase your income and reputation in the industry. So, enlist the aid of the tax experts at H&R Block India to file your annual tax return, who will ensure your taxes are filed utilizing the maximum tax saving deductions available to you.

Not sure how to file your Business Tax Return? Let H&R Block help you file your taxes.
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