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44ad : eligibility for beauty parlour business(unregistered)

Jyothis (Article) (1127 Points)

11 June 2016

An unregistered Beauty parlour run by a Husband & Wife, they are not maintaining any books of Account.

Are they eligible for Income tax computation u/s 44AD (Income persumed to be 8%).

Can ITR be filed using the PAN of anyone of them for their business u/s 44AD.

So that their won't be any issue of maintenance of books of Accounts & Clubbing of income.

Assume if their total receipts during an year is 12 lacs per annum,8% of same being Rs.96,0000/-.Are they eligilble for Income tax basic exemption of Rs.250,000/- & mean no tax payable during FY 2015-16.

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14 Replies

CA Saurabh Singh (Practising Chartered ) (974 Points)
Replied 11 June 2016

HI Jyothis,

Yes, you can compute your Income u/s 44Ad as you are not covered under the specified set of business on which sec 44AD does not applies.However following conditions must be satisfied, the receipt must not exceed tax audit limit and the presumptive rate assumed should not be less than 8%.

And the basic exempttion limit i.e 250000 is provided under the specific section.

Thanks,

CA SAURABH SINGH,

7210864420

1 Like

Harshit Kabra (INVESTOR) (Student CA final) (1113 Points)
Replied 11 June 2016

As per budget 2016, sec 44AD is now extended to professions also earlier it was only about business, here the income from running beauty parlour will be treated as income from profession, provided that its gross receipt should be less than or equals to 50 lakhs can claim 50% as income from professional.
for earlier PY it was not applicable.

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CA MANISH BINDAL (CHARTERED ACCOUNTANT ) (535 Points)
Replied 11 June 2016

Yes you can opt for Section 44AD and claim 8% profit of total receipt and also avail benefit of basic exemption limit that is 250000, without maintaining accounts. But as per your question regarding that any one of husband and wife can efile their return showing income from the parlour if any one of husband and wife file their itr including income from parlour He or she will be deemed to be the owner of the parlour for income tax purpose and for future the same person has to include parlour income in their tax return who have claim such income in this year.

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Jyothis (Article) (1127 Points)
Replied 11 June 2016

So there is no issue in a "NIL Return" with Rs.12,00,000/- Gross receipts.

It is basically business nature,eventhough Wife is beauty parlour technician, husband have also contributed his share of fund (However no Regd. Partnership deed is maintained)

Various items purchased are used in the process of providing service.

sandeep (student) (188 Points)
Replied 12 June 2016

jyothis Ji while going to your post One thing I understand that your firm is a partnership firm .one thing I want to tell about 44Ad section is that section says about presumptive income to shown on the basis of gross receipts shown in the books only for those assessee whose specified set of books are not required to maintain .it also says in the new amendments that income under section 44Ad means all the expenses and depreciation is deemed to be excluded from income but no expenses related to partner such as partner salary and interest will be not allowed while computing your income.

moreover if you have availed this scheme of showing the income under this scheme be careful since in the new finance act it is specifically mentioned that if the scheme used and within the five the assessee show income below 8% then assessee can't use this scheme for next five years

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Jyothis (Article) (1127 Points)
Replied 12 June 2016

Business is run by a Husaband & wife,Business is not registered as Partnership & no PAN is taken in the name of business.

PAN is available only for individuals & only book maintained is a Receipt book.(Total receipts during FY 2015-16 is Rs.12 lacs)

No books are maintained for expense.

Margin of their business may actualy exceed 8%,as their cost includes purchase of cosmetics,salary,rent,Electrcity & some other few petty expenses.

Is there any issue in filing as business,since wife is a beautician (Technician) ; in any sense is it necessary to call it as profession and 44AD can't be applied.

Can ITR be filed with 96,000/- as Taxable profit & claim basic exemption of Rs.2.5 lacs & return is nil return with Zero Tax.

Any Issues ???

Harshit Kabra (INVESTOR) (Student CA final) (1113 Points)
Replied 12 June 2016

No, u was wrong, actually it should be treated as profession since they are just providing beauty services

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Harshit Kabra (INVESTOR) (Student CA final) (1113 Points)
Replied 12 June 2016

although they are giving beautifies material, facial material, but majorly the are just engaged in activity of profession, providing facial materials are just imdirect way to earn income.
so assuming total receipt is 12lac and 50% of their gross receipt shall be treated as income from profession i.e.600000, so tax to be calculated on 600000 .

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Harshit Kabra (INVESTOR) (Student CA final) (1113 Points)
Replied 12 June 2016

if the assessee belives that their taxable income is less that basic exemption limit, then they have to maintain accounts and get audited for such lower of income.

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sandeep (student) (188 Points)
Replied 12 June 2016

harshit Ji you right in the saying that if the assessee fo

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sandeep (student) (188 Points)
Replied 12 June 2016

harshit Ji you right that professionals assessee which are prescribed in the section 44 are required to maintain book account or have to declared income 50% on the basis the gross receipts.
but the assessee who are providing the service of beauty parlour is not covered under the definition of the profession prescribed by the income tax act 1961 hence the assessee has neither required to maintain the books of accounts neither has to declared income 50% of gross receipts.
Assessee can file return u/s 44 ad

1 Like

Nilesh Gami (Auditor) (222 Points)
Replied 12 June 2016

Sectio 44 AD for presumptive taxation @ 50 % for professional can avail for specified profession only. Beaty parlour is not covered in these profession list.

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Harshit Kabra (INVESTOR) (Student CA final) (1113 Points)
Replied 12 June 2016

no doubt, if they are registered in partnership act,if they are partners registered along with deed and uner the ACT, then that should be treated as business. section 44ad shall applicable (if under the limit)
.

1 Like