What is section 44AD? Under Section 44AD of presumptive taxation......

 What is section 44AD?

Under Section 44AD of presumptive taxation , small taxpayers with less than 2 crore of turnover are not required to maintain books of accounts and their profits are presumed to be 8% of their turnover. For availing benefit under this scheme, profits where income is credited digitally or through the bank will be considered as 6% as against 8% for cash receipts. If a taxpayer opts for presumptive taxation , he will not be allowed deduction for expenses u/s 30 to 38.

Section 44AD is applicable from which year?

Sections 44AD and 44AE were introduced by the Finance Act, 1994 with effect from Assessment Year 1994-95. However since introduction , there have been updates in this section. Recently section 44AD has also been updated in Budget 2020

What is presumptive income under section 44AD?

Section 44AD was introduced to give relief to the small taxpayers from maintaining books of accounts who have turnover less than Rs 2 crores ( amended to 5 crores subject to minimum criteria of digital transaction in budget 2020). Under the presumptive income scheme, the taxpayer is allowed to presume the minimum profits at prescribed rate of the total turnover and is relieved to get the books of accounts audited.

Who can file return under section 44AD?

Section 44AD of presumptive taxation can be opted for below mentioned assessees

Resident individuals, HUFs and Partnership firms who have not claimed exemptions under section 10A/ 10AA / 10B/ 10BA (deductions of profits derived from export of articles or things)

The firm or individuals gross receipts in the previous year should not be more than 2 crore ( or 5 crores subject to minimum criteria of digital transaction of more than 95 % of total receipts and payments in budget 2020)

Individuals or firms engaged in the business of plying / hiring goods carriages cannot adopt these provisions.

Provided the firm or individual opting for presumptive taxation scheme have to declare minimum 8% profits or 6% in case of digital receipts )

What is turnover under section 44AD?

Individuals , HUFs or partnership firms to be eligible for opting for presumptive income u/s 44AD should not have turnover more than Rs 2 crore.

How to file an income tax return under section 44AD?

The sugam ITR 4S is a simplified return form to be used by an assessee if he is eligible to declare profits on presumptive basis and does not maintain books of account u/s 44AD and 44AE. 

How to calculate tax under section 44AD?

Section 44AD is a presumptive taxation scheme , income will be calculated on the basis of 8% of the turnover( 6% in case of digital receipts and payments) and the taxpayer has a relief for not maintaining the books of account . For example Mr. Uday is having a bookshop with turnover of Rs 70 lakh for the previous year. He wishes to opt for presumptive taxation under 44AD , under this section his income will be computed at 8% of the turnover Rs 5.6 Lakh. Annual presumptive tax will be calculated as per slab on Rs. 5.6 lakh.

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  1. This answer does not provisions of 43b. Please help


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