I am a senior citizen freelancing as a lecturer. Is presumptive taxation allowed for consultants?

Right ITR form

I am a senior citizen currently earning income as a freelancer by lecturing part-time in two graduate colleges. I also have income from FDs, dividends from mutual funds, and an annuity from LIC. Do I qualify for presumptive taxation? Which ITR should I choose to maximise tax benefit? 

Expert Advice: Please note that the option of choosing a particular ITR form does not itself entail any tax benefit. It is the composition of your total income and other factors that determines which ITR form is applicable for reporting your income.

Since you are freelancing by lecturing in colleges, the income is taxable under the head “Profits and Gains of Business or Profession.” Individuals with business or professional income can use either ITR-3 or ITR-4. However, ITR-4 can be used only if you are eligible to opt for the presumptive taxation scheme and your taxable income does not exceed Rs 50 lakh in a year.

Teaching income is generally treated as professional income and not business income. Only certain specified professions are eligible for presumptive taxation under Section 44ADA, such as doctors, lawyers, chartered accountants, company secretaries, cost accountants, engineers, architects, and those engaged in the film industry, among others.

The profession of teaching is not covered under Section 44ADA. Under this section, 50% of gross receipts are deemed taxable income if the gross receipts do not exceed Rs 50 lakh (or Rs 75 lakh if the cash component does not exceed 5% of gross receipts).

Since teaching is not included in the specified professions, you will not be eligible for presumptive taxation. Therefore, you will have to use ITR-3 for reporting your income. Against your freelance income, you can claim expenses incurred in connection with earning such income, such as conveyance expenses, books, printing, and stationery. You may also claim depreciation on a computer or printer used for preparing lectures.

As for choosing between the old and new tax regimes, under the old regime, you can claim a deduction of up to Rs 50,000 under Section 80TTB against interest from bank fixed deposits, in addition to regular deductions under Sections 80C and 80D. The new regime, on the other hand, offers lower tax rates but without most deductions. You will need to compare your tax liability under both regimes and make a decision based on which is more beneficial in the long run. Do note that if you have income taxable under the “business or profession” head, you cannot freely switch between the old and new regimes every year.

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