Skip to main content

Practical issues in Presumptive Taxation – 44AD, 44ADA & 44AE

Under section 44AD from if the Turnover of an assessee being resident individual, HUF, Partnership Firm (not being a LLP) and who is not claiming deduction under section 10A, 10AA, 10B &10BA or deduction under Chapter VI A under the heading ‘C -Deductions in respect of certain Incomes’ and derives income from any business except business in respect of plying, hiring or leasing goods carriages referred to in section 44AE is less than Rs. 2 Crores, then 8% of the turnover shall be deemed to be the income from Business, unless he declares more than that and any deduction allowable under sections from 30 to 38 shall deemed to have been allowed. Up to Asst Year 2016-17 in the case of Firms interest and salary were specifically allowed as deduction subject to limits specified under section 40(b). Once the Assessee has offered income under this scheme and if in any subsequent year if lower income is offered he shall not be eligible to claim the benefit of this section for next five years. The rationale behind this provision is not understood. The provisions of this section are not applicable to Professionals, and persons earning income from Agency Business/Commission & Brokerage. Now in the Budget it has been proposed that business income will be calculated @6% in respect of Turnover of gross receipt which is received by an account payee cheque/draft/use of electronic clearing system on or before the due date of filing the return of income. In respect of Sundry Debtors the amounts received in modes other than cash may be out of sales made in previous years and identifying the amounts received in such form for sales made in the current year and that too for such receipts received till the due date of filing the return of income is a herculean task unless separate records are kept. Though they need not keep ‘Books of Account’ some record should be maintained to confirm that the turnover is less than Rs. 2 Crore and to show out of the said Rs. 2 Crores how much is received in cash and how much is received in other modes. To avoid disputes the Income Tax Act/Rules may prescribe records and supporting documents to be maintained so that at the time of scrutiny or otherwise it will be easy for verification.

Likewise under section 44ADA for assessees engaged in profession referred to in subsection (1) of section 44AA such as legal, Medical, Accountancy, Technical Consultancy. Interior Decoration etc., if their gross receipts are less than Rs. 50 Lakhs,  then 50% of the turnover shall be deemed to be the income from Business, unless they declare more than that and any deduction allowable under sections from 30 to 38 shall deemed to have been allowed. It has been specifically stated that no further deductions under those sections shall be allowed.  Right from the inception in the case of Firms no deduction was specifically allowed as it was allowed u.s. 44AD.

Similarly under section 44AE for Assessees engaged in business of plying, leasing or hiring of trucks owning not more than 10 trucks at any time during the previous year,  income will be estimated @ Rs. 7,500/- p.m. per truck unless they declare more than that and any deduction allowable under sections from 30 to 38 shall deemed to have been allowed. In the case of Firms, interest and salary were specifically allowed as deduction subject to limits specified under section 40(b). Further the concession extended u.s 44AD with regard to receipts in modes other than cash is not proposed.

Though under all these sections if lower income is offered they have to maintain the prescribed books of account and get them audited under section 44AB, under section 44AD alone the return can be filed even without audit report also and such returns will be subjected to scrutiny under section 143(3).
Fortunately the restriction stipulated under section 44AD relating to denial of benefit of presumptive taxation for five years once the assessees offer less income after offering income under this scheme is not found in sections 44ADA & 44 AE.

While, in the case of Firms, the salary and interest, which were specifically allowed for assesses offering income under section 44AE, the specific proviso is missing in sections 44AD and 44ADA. In my opinion since it has been provided in section 44AD and 44ADA that only ‘deduction allowable under sections from 30 to 38 shall deemed to have been allowed and no further deduction under those sections shall be allowed, the Assessees, which are Firms, offering income under sections 44AD and 44ADA can claim the salary and interest paid to Partners also about which there is no mention in sections 30 to 38 and the allowable limits are specified in section 40(b) only. Moreover it is also reasonable to allow the deduction of interest and salary to Partners since the same will be subjected to tax in their hands along with other incomes earned by them.

Likewise the concession in the rate of calculation of income offered for digital transactions under section 44AD may be extended to the Assessees who are offering income under section 44ADA and 44AE also.

The rate of 50% of gross receipts to be offered as income is very high for professionals. Few Professionals who give opinion/advise/consultation only may be able to retain 50% of their gross receipts as profit. But other regular professionals, who are in majority, have to maintain regular office supported by trained staff with computer, vehicle etc., wherein they will not be able to retain 50% of their earnings as profit. This may be brought to at least 25%.

(Author can be reached at By- Sonu Mehla Mobile- 8285910007 E-Mail- sonuandfirm@gmail.com)

Popular posts from this blog

Youtube Creative Commons (CC) क्या होते हैं और इनका इस्तेमाल कैसे करें

क्रिएटिव कॉमन्स (Creative Commons (CC) | Youtube Creative Common Video Kya Hote Hain - Janiye Hindi Me | Creative Common Videos का इस्तेमाल कैसे करें Rohit Maan Posted by Rohit Maan 10/04/2020 Creative Commons On youtube in hindi guide guruji दोस्तों सामान्यतः यूट्यूब पर जो सामग्री होती है, उसका इस्तेमाल कोई भी दूसरा व्यक्ति फिर से नहीं कर सकता है ओर ऐसा करना यूट्यूब की पॉलिसी के खिलाफ होता है और अगर आप यूट्यूब की किसी भी सामग्री को कॉपी करके फिर से यूट्यूब पर डालते हैं तो उसका ओरिजिनल मालिक आपके खिलाफ कॉपीराइट स्ट्राइक लगा सकता है और इसके चलते Youtube आपके चैनल को ब्लॉक कर सकता है। लेकिन यूट्यूब पर कुछ ऐसी सामग्री भी उपलब्ध हैं, जिनको आप इस्तेमाल कर सकते हैं और आपके खिलाफ कोई भी कॉपीराइट क्लेम नहीं आएगा। youtube की ऐसी सामग्री को Creative Commons सामग्री कहते हैं। जी हाँ दोस्तों, यूट्यूब पर उपलब्ध Creative Common वीडियो या सामग्री को आप डाउनलोड करके फिर से अपने चैनल पर कैसे भी इस्तेमाल कर सकते हैं और आपके खिलाफ ऐसा करने से कोई भी कॉपीराइट स्ट्राइक भी नहीं आएगा। Youtube पर उपलब्ध Creat...

Details overview of Busy Software

Download the latest versions of Busy Desktop, Busy Mobile App, Busy Agent, Busy BNS, Migration of Data from Tally to Busy, Formats for GST Data Upload, Sample Data and other related resources to help you get started with and usage of Busy Accounting Software. BUSY 21 Release 10.0 (Latest Release) of Busy Accounting Software – India’s No.1 GST Accounting Software file_download Download Busy 21 Release Notes Statutory Updates Archives BUSY 21 (Rel 9.7) file_download BUSY 21 (Rel 9.6) file_download BUSY 21 (Rel 9.5) file_download BUSY 21 (Rel 9.4) file_download BUSY Online Client Latest Release – Most Secure Online Accounting On Cloud file_download Download Busy Online Client BUSY Mobile App Download the latest version of BUSY Mobile App, which gives Busy Desktop Software Customers access to 100+ reports related to Sales, Purchases, Receivables, Payables, Stock and much more. The app also allows you to create and share receipts, invoices, orders and quotations with ease   BUSY BNS Dow...

9 Smart Ways To Boost Reader Engagement On Your Blog

Are you struggling to get your readers to engage with your blog? When I started blogging, I struggled too. But then I found that people who have an engaged audience on their blogs have this one thing in common: Their content is interesting. “How can I make my content interesting?” Well, that’s what I will be answering in this guide. I know how it feels when your readers read all your posts but don’t take the time to comment or share. I know it hurts. Reader engagement is the key to building a massive community of fans. Your readers engage with your blog in a lot of different ways. This engagement could take place in any of the following forms: Commenting on your blog posts Sharing your blog posts Navigating to another blog post Subscribing to your newsletters Or simply taking some action Reader engagement is also a search engine ranking factor. Google uses the bounce rate of your website to measure Reader Engagement. Bounce Rate is simply ...