Expense Management Tricks Doctors Must Know

Service tax is not applicable to a doctor’s consultation (except plastic surgery). One cannot take or give a cash loan of more than Rs. 20,000/- from or to a person. Even a husband cannot give a loan of more than Rs. 20,000/- to his wife in cash. The penalty is 100-300%. The classical example is when a person has to pay cash on Saturday evening as part of the hospital bill. If the amount exceeds more than Rs. 20,000/-, then one needs to take loan from two different entries. Cash expenses of more than Rs. 20,000/- to one party in 1 day are not allowed in income tax. It can be Rs. 19,900/- but not Rs. 20,000/-. If a medical doctor’s income is more than 50 lakhs per year then tax audit is a must. Presumptive Tax Scheme U/S 44AD is extended to doctors also. If the gross receipt is below 50 lakhs and the taxable profit is shown 50%, there is no need to maintain books of accounts and no tax audit required. Every doctor is supposed to maintain books on records and patient register as prescribed in Income Tax Act Form 6 (F). It is mandatory by law. Concealment of income is a crime with a penalty up to 300% (maximum). Income generated from writing articles or appearing in TV or radio is not exempted under Income Tax. But professionals can claim expenses against them. For e.g., for travel, research, searching of messages, etc. All expenses for conferences and business meetings are fully allowed under the Income Tax Act. One can pay salary to the wife, if she is technically and professionally qualified. You can pay salary to her or to her daughter. Ask your employer to reduce your salary or professional income and give Rs. 15,000/- as medical reimbursement. The same is exempted under Income Tax. It is always better to be on professional fee than on salary as you can claim expenses to any amount. You can claim depreciation on your car besides Driver salary, Car maintenance or petrol expenses. If the area you are practicing is not in your name then you can give house rent or clinic rent to your partner, son and daughter. The same will be claimable as full expenses. Always show 50% of your house as office or clinic and claim depreciation on it. In a partnership, both husband and wife can draw salary if they are shown to be professionally working in that organization. The maximum amount paid as salary cannot exceed as specified in Section 40(b) i.e., up to Rs. 3,00,000/- salary allowed 90%. Above 3 lakhs, 60% is allowed as salary. Always buy a property in the name of Hindu Undivided Family (HUF). It gives you an opportunity for one more account to save income tax. Always buy a property in the name of HUF and pay rent for your clinic to your own HUF. Always buy a car as you can claim the depreciation on the car and 100% reduction on car allowances. It is always better to pay rent to your wife as by this you can claim 100% reduction from your professional income and in addition, she will get 30% rebate on rental income. Up to Rs. 800/- per month of travel allowance is not taxable. Similarly, expenses for uniform, conveyance and reimbursements of expenses are not part of the taxable income. Accordingly modify the salary heads of your employees. One can claim a leave travel allowance two times in 4 years for a visit anywhere in the country. If you have taken a housing loan jointly along with your wife, then deduction of interest paid on housing loan can be taken by both @ Rs. 2,00,000/- each.