SECTION 44AD PRESUMPTIVE TAXATION – INCOME TAX ACT, 1961
The provisions of section 44AD of Income Tax Act 1961 prescribes procedure for computing business profits under presumptive basis. SECTION 44AD PRESUMPTIVE TAXATION
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Person eligible to opt for section 44AD
The following is list of persons eligible to opt for section 44AD presumptive taxation
- Individuals
- HUF
- Partnership Firms (excluding LLP (limited liability partnership)
Business not covered under section 44AD
The taxpayer should be engaged in any business (whether it is retail trading or wholesale trading, or civil construction or any other business).
The following list of taxpayer are not eligible for opting for presumptive taxation
- Person carrying on profession as referred to in section 44AA(1)
- Person earning income in the nature of commission or brokerage
- Person carrying on any agency business
- Person who is in the business of plying, hiring, or leasing goods carriages
Can a person engaged in profession under section 44AA(1) opt for Section 44AD
No, the person carrying on profession under section 44AA(1) can opt for this presumptive taxation basis.
Can an Insurance agent opt for Section 44AD
An insurance agent cannot opt for this presumptive scheme u/s 44AD
Person who total turnover or gross receipts exceeds Rs 2 Crores cannot opt for Section 44AD
Total turnover / gross receipts during previous year should not exceed Rs 2 Crores for FY 2019-20. Refer prescribed limit for respective financial year.
No need to maintain books of accounts under section 44AA
The taxpayer opting for section 44AD shall be exempt from maintenance of books of accounts related to such business as required under section 44AA.
Liability to pay advance tax for income under section 44AD
The taxpayer is required to pay advance tax related to such business from the financial year 2016-17 and onwards.
Presumptive Income under section 44AD
Income from eligible business is calculated at 8% of the gross receipts or total turnover.
Can taxpayer declare higher income u/s 44AD
The assessee can voluntarily declare a higher income in this income tax return.
No depreciation allowed on presumptive income derived u/s 44AD
The written down value is calculated and deemed to have been allowed (if applicable).
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