The locum economy and tax efficiency.

Locum work — short-term clinical assignments at hospitals, weekend cover, holiday substitution, or specialty-specific procedural support — is a significant income line for many Indian doctors. Yet locum income is, in our experience, the most poorly-structured income line in most doctor financial files. The trouble is largely about categorisation and the deductions and structures that follow.

What locum income actually is

Locum income is, almost without exception, professional income. The doctor is providing professional services to a hospital, on a contract or per-event basis, for which they are paid. This is true whether the locum is for a single weekend, a regular monthly arrangement, or a longer-term temporary engagement.

The default, however, is for many doctors to either:

• Treat locum income as additional salary, paid through TDS, without claiming any of the deductions available to professional income.
• Or, more commonly, not formally distinguish locum income from primary practice income, leaving it to flow through whichever default the CA applies to the bulk of practice income.

Both are sub-optimal. The first foregoes deductions; the second sometimes triggers complications around TDS reconciliation and over-withholding.

What good structuring looks like

Three structural moves materially improve the tax position of locum income.

1. Treat locum income as profession income. This unlocks deductions for travel to and from the locum location, equipment use, professional fees, and the apportioned share of practice overhead. A doctor doing significant locum work at multiple locations may have substantial deductible travel and equipment costs that, under salary categorisation, are simply lost.

2. Maintain proper books. A doctor with locum income should maintain a simple ledger — receipts, invoices, expenses by category, dates. This is a small administrative burden that produces large compliance and audit-readiness benefits. Software solutions (Zoho Books, Tally, simple Google Sheets) handle this trivially.

3. Use the right entity. A doctor whose locum income is consistently substantial — say, above ₹40-50 lakh per year — should consider whether the locum work is best billed through a clinic LLP, a sole-proprietorship, or in personal name. Each has different implications. The LLP route, for higher-volume locum practice, often produces the cleanest mix of compliance simplicity and tax efficiency.

The 44ADA option

For many doctors, Section 44ADA — the presumptive taxation regime for professionals — is a useful instrument for locum and supplementary income. Under 44ADA, the doctor can declare 50% of gross professional receipts as taxable income, without maintaining detailed books, provided gross receipts stay within the threshold.

This works well for doctors whose actual deductible expenses are below 50% of receipts (i.e., who would otherwise be claiming less than 50% in deductions through normal accounting). It does not work well for high-overhead practices where actual deductions exceed 50%, in which case standard accounting and full deduction are better.

Choosing between 44ADA and full accounting is a decision worth making annually with a CA who has seen the doctor's specific numbers.

The TDS reconciliation problem

Hospitals and clinics that engage locum doctors typically apply TDS on the payments. This produces a Form 26AS entry under the doctor's PAN. If the doctor categorises this income correctly as profession income at filing, the TDS credit reconciles cleanly. If not — particularly if the doctor's CA does not align categorisation with what the hospital reported — there can be friction at filing, often producing under-claimed TDS credit or filing notices.

This is a paperwork issue. It is also an annual annoyance for many doctors who don't know it can be eliminated by clean structuring.

A useful annual exercise

We typically advise doctor clients with significant locum income to do a small annual review:

• List each locum engagement of the year — hospital, dates, gross receipts, TDS deducted.
• List the related expenses — travel, accommodation, equipment, professional fees.
• Reconcile against Form 26AS.
• Decide between 44ADA and standard treatment for the year, given the specifics.
• Document the decision and the rationale.

This exercise takes a couple of hours a year. It typically saves the doctor 10-25% of the tax otherwise paid on locum income, depending on volume. Over a 25-year career, this compounds to meaningful additions to the family balance sheet.

When locum income becomes a structural asset

For doctors who do significant locum work — particularly senior consultants who have moved away from full-time hospital appointments and now work flexibly across institutions — locum income can be the cleanest line on the entire financial statement. Properly structured, it can be:

• Routed through an LLP with deductible expenses.
• Used to fund long-horizon investment vehicles via the LLP, taxed efficiently.
• Coordinated with the family's HUF or trust structure, where applicable.
• Built into the overall tax architecture rather than treated as ad-hoc supplementary income.

The transformation from "locum income as scattered supplement" to "locum income as structured income line" is small in operational terms — a CA conversation, a few decisions, the discipline to maintain books — but cumulatively significant.

The plain version

Most doctors with meaningful locum income are losing 10-20% of its value to default categorisation and missed deductions. The fix is administrative, not aggressive. The savings are reliable, year on year, and compound to a meaningful share of total wealth over a career. It is, of all the structural improvements we make for doctor clients, one of the most consistently rewarding for the smallest amount of effort.