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Presumptive tax for individual business

Shanthi (Junior Student) (226 Points)

24 July 2023

Dear All,

https://incometaxindia.gov.in/Booklets%20%20Pamphlets/15-presumptive-taxation.pdf

My client's nature of business is software consultancy and his clients are mostly abroad. So software exports category. He is doing it under individual current account.

He intends to change to presumptive taxation from assessment year 2024-2025

I wish to please confirm the following

1) So he will come under 44ADA or 44AD?

2) Since all his receipts are through bank only, his tax will be 6% or 8% of gross receipts?

3) So on or before 15th March 2024 he has to remit the entire tax liability as advance tax?

4) Also is there any minimum income limit under 44ADA or 44AD?

Apart from the above any other precautions my client has to take this year now or any other missing steps?

As usual THANKS A LOT

Shanthi

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14 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160396 Points)
Replied 24 July 2023

1. Select Sec. 44ADA

2. Minimum 50% profit margin.

3. Yes, otherwise interest charged.

4. No.

1 Like

Shanthi (Junior Student) (226 Points)
Replied 24 July 2023

Thanks Sir,

1. Select Sec. 44ADA

Is this confirmed? He is not a professional he is doing software development for multiple clients? So this should 44AD or 44ADA?

2. Minimum 50% profit margin.

Can you please explain more? SO suppose his gross receipts for a year is Rs 18 Lakhs the tax to be paid is

a) 6% i.e Rs 1.08 Lakhs ?
b) 8% i.e Rs 1.44 Lakhs?
c) 50% i.e Rs 9 lakhs ?

which amount should be paid as income tax?

Thanks

Shanthi

1 Like

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160396 Points)
Replied 24 July 2023

1. sec. 44ADA is based on the services provided by him. He can otherwise declare his income under normal assessment.

2. Under sec. 44ADA. 50% is minimum.

1 Like

Shanthi (Junior Student) (226 Points)
Replied 24 July 2023

Thanks. Sir

Thanks for all answers

I assume he falls under 44ADA even though he has registered in MSME as proprietorship and also pays salaries to a few part time employees from time to time but he operates through individual current account

Regards

Shanthi

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160396 Points)
Replied 24 July 2023

Yes, service provider can also register as proprietor under MSME, and can hire employees.

1 Like

Shanthi (Junior Student) (226 Points)
Replied 24 July 2023

Originally posted by : Dhirajlal Rambhia
	Yes, service provider can also register as proprietor under MSME, and can hire employees.

Thanks Sir. So even though he has registered in MSME and hires employees he will be considered in 44ADA and not in 44AD?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160396 Points)
Replied 24 July 2023

The services provided are not eligible to be assessed under sec. 44AD of IT act.

You can either declare it under sec 44ADA or file the income normal assessment.

Shanthi (Junior Student) (226 Points)
Replied 25 July 2023

Thanks Sir now I'm clear.

Final question Sir.

Suppose client turnover is 18 lakhs and export of services is Zero Rated GST so anyway client shows GST separate in his invoice, client either shows LUT or gets refund for paid GST in this case

Under section 44ADA taxable income is

a) 9Lakhs (50% of 18 lakhs)

b) 7.38 Lakhs (50% of 18 lakhs - 18% GST)

So it is a) or b) Sir

Thanks

Shanthi