Taxation is the most essential wing of the government’s revenue. It contributes a bulky amount to the government to meet the social and economic need of the nation. When collecting tax from the public the government tries to implement the tax structure which is extremely simple so that the general public does not feel the burden to determine and pay tax. As per the general scenario, the small business is not well equipped to duly follow the tax provisions and efficiently comply with it. Considering it income tax act provides relief to the small businesses.
When is presumptive taxation available?
As per the provisions of sec 44AD any individual, HUF or a partnership firm engaged in any business except the business of plying, hiring or leasing goods carriages can avail the benefit of presumptive taxation. The basic condition is that the total turnover/Gross Receipt in the previous year does not exceed Rs.40 lacs.
Benefit of Presumptive Taxation
· When the aforesaid conditions are satisfied, the income of the business is estimated at 8% of the total turnover or gross receipt of the business.
· No deduction in respect of the business expenditure (including depreciation on the assets used in the business) is allowed to be claimed from the deemed profits. The deductions are deemed to have been given full effect to and no additional deductions are allowed except for a few specified deductions as mentioned under the said provision.
· In case of partnership firm, the normal deduction in respect of salary and interest to partners’ u/s 40(b) shall be allowed.
Payment of Advance Tax
No advance tax is required to be paid by the assessee in case of presumptive taxation.
Maintenance of Books of accounts
The tax payer is not required to maintain specified books of account/ other documents in respect of their business. Also, there is no need to get the accounts audited and furnish an audit report.
What if profit falls below 8%?
An assessee earns profit below 8%, then he can declare lower income below deemed profits and gains. Provided he will have to maintain the books of account as per sec 44AA and will have to gets it audited as per section 44AB, irrespective of the turnover provided his total income exceeds the exemption limit.
You can also submit your article by sending to firstname.lastname@example.orgSubmit article