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Online business (e-commerce) eligible for section 44ad

Kartik (Self Employed) (75 Points)

01 October 2015

Is online business (e-commerce, online marketing etc) eligible under section 44ad for presumptive taxation.

I've heard lot of different opinions and nobody is consistent with their answer.

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6 Replies

Karthik.V.Kulkarni (Chartered Accountant) (594 Points)
Replied 01 October 2015

Hi Shubham,

Sec 44AD is applicable to nature of business provided . It is not applicable in case of earnings in form of commision or brokerage. And please read the comment with the relevant limits specified in sec 44AD.

Regards

Karthik V Kulkarni

Kartik (Self Employed) (75 Points)
Replied 01 October 2015

Getting fixed rates/fee from various advertisers for certain services like downloads/singups etc considered as commissions? or not?

Karthik.V.Kulkarni (Chartered Accountant) (594 Points)
Replied 01 October 2015

Hi Shubam,

Assuming that you are not acting on behalf of another person, the fixed fee you recieve are in the nature of professional fees or technical fees. Thus the same doesnot amount to commission. Thus you will come very well within Sec 44AD.

And as you are an individual i dont know why you have come up with this query at such at the 11th hour? may be in your case due date might be or it might be not. Kindly take professional help as soon as possible disclosing all material facts regarding your case.

Regards

Karthik V Kulkarni

Kartik (Self Employed) (75 Points)
Replied 01 October 2015

I have taken professional help, and even they are confused whether my income comes under commission or fees. So just wanted to confirm from some other experts what they think about it.

Just to clarify more, if you don't mind (i really appreciate your help here), acting on behalf of other person means? I am generating downloads/signups for a company/advertiser (lets say for example "angry birds game") and getting fixed rates for that. Is that commission based income or professional/technical fees. And as professions are not included under section 44ad, this would be considered business or professions?

Karthik.V.Kulkarni (Chartered Accountant) (594 Points)
Replied 02 October 2015

Hi Shubham,

How do you go about generating downlads and signups? do market the said product person to person? or do you advertise it on your own site , page etc and allow people to click on them (like suggestion which appears in most of the sites) . Your payement is fixed as , per / download ot per/ signup? Are you acting on behalf of the company which realeases apps? does your contractual agreement say so?

Acting on behalf meaning : A classic example would be a stock broker who acts on behalf of his clients. He does things which clients tell him to do.

I am pretty confident that your case doesnt come as acting on behalf , as common business structure goes you are an independent marketer and you can be paid for downloads and signups of many apps , not only one app.

There might be consfusion as to even your work may be considered as acting on behalf as you are only enabling downlaods and signups for your clients and getting fixed rate of fee. But let me try to differenciate , the main point being the instructions you get from your clients, where your clients are not specifically directing you to do things, you cannot be called as acting on behalf of your clients even though you are being paid a fixed rate per signup or download.

example1): A hires B to procure certain product in place where B resides and pays him 1% of total procurement. The product to be procured is determined by A.

example 2): A has open contract where it states that rs 10 would be paid for every product a procurer procures, of many other procurers B is also one.

In example 1) it is commission as you are hired by A to do certain work and you have to complete the said work taken, you are under direction of A or acting on behalf of A .

In example 2) even though it could be called commission the same as per my view is not as it is an open contract and you can either enter into it or not and even on enetering into contract you are not under any obligation that you "have to " procure, you can not procure and earn nothing , if you wish so , this what is meant by being independent of the client or providing services independent of client. On the other hand B can have contracts of type mentioned in example 2 with other procurers too be it C,D, F.

Regards,

Karthik V Kulkarni

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