Section 44AD:- PRESUMPTIVE INCOME

In order to give relief to the small business organizations Income tax law introduced a new scheme called Presumptive Income. The silent features of this scheme are:

1. This is an optional scheme
2. This scheme is applicable only for the resident Individual, HUF and Partnership firm (not being LLP)
3. Assessee’s opting for this scheme are not required to maintain books of Accounts.
4. This scheme is applicable to any business (except for the business of playing, hiring, leasing of goods carriers) whose turnover or gross receipts does not exceed 2 Crore rupees in the previous year.

However this section doesn’t apply to:-

(a).A person carrying on specified profession referred in section 44AA

i. Legal
ii. Medical
iii. Engineering
iv. Architectural
v. Accountancy
vi. Interior decoration
vii. Professional consultancy
viii. Any other notified profession

(b).A person earning income in the nature of brokerage or commission.
(c).A person carrying on agency business.

5. The profits and gains from the eligible business shall be deemed to be 8% of the turnover or gross receipts.
6. The deductions from section 30 to 38(rent, rates, taxes, repairs, depreciation……etc.) are deemed to be allowed.
7. In case partnership firm is an assessee, then remuneration to partner’s and interest on partners capital will be allowed under section 40(b).
8. The assesses opting for the above scheme is not required to pay advance tax.

In case the assessee wants to disclose an income which is lower than the presumptive income, then he has to maintain books of accounts and get it audited under section 44AB.

– Contributed by Sateesh Kumar