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Incorrect TDS section and Presumptive taxation

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11 July 2024 Dear Sir,

Mr A files his return u/s 44AD. He provides gaming services to individuals and corporates. One of his parties deducted TDS u/s 194I(a) instead of 194C and deposited the tax. He uploaded his return showing his entire turnover of 750500/- u/s 44AD.

But he got the intimation of defective return mentioning that the TDS is deducted u/s 194I which is ineligible for presumptive taxation.

There was no event of renting out of anything nor his invoice mentions rent etc.
How can the defect be rectified?

Kindly guide me.
Thanks & Regards,

11 July 2024 Need to rectify the TDS return by the party. The TDS should have been deducted u/s. 194C IT act.

11 July 2024 Thank You Rambhia Sir...

11 July 2024 You are welcome.

13 July 2024 Rambhia Sir, the party is not ready to revise their TDS return saying they are correct. Can we show this transaction under other income, though the TDS is deducted u/s 194I(a)? And rest of sale u/s 44AD? He is registered u/s GST also.

13 July 2024 If it is the same business, you cannot bifurcate. If different business then you can try.

13 July 2024 Sir, the business of Mr A is loss-making and also the books were not properly maintained by him, so presumptive taxation was opted since last year.

He has only savings interest as other income. The other party filed tds u/s 194I(a) this year, his return got defective.
What if we file his return as a normal return showing loss in response to the defective return notice?? will the tax audit be applicable then??
Kindly guide.

13 July 2024 Yes, in that case audit will be applicable. You can file return under normal assessment, with minimum 6/8 % profit margin.

13 July 2024 Sir, no other solution except to revise TDS return?? without his mistake.... His income is hardly anything and now if Tax audit is to be done then it will be costly affair for him. Is tax audit to be done for next 4 years also?

13 July 2024 You may try it with secondary business under rental income and declare the income under IF HP..

13 July 2024 Hmmmmm Yes sir... But that other party is not even ready to revise TDS return nor provide contact details of their CA... Actually IT dept should provide some solution in such cases.....

13 July 2024 I repeat declare the sec. 194I(a) income under IF HP as secondary business...

13 July 2024 Sir, IF HP mean Income from House Property? or to show under Income from Other Sources?? IFHP activity is not registered under his GST registration.
I'm sorry if I am annoying you.

13 July 2024 Yes, you need to register there as early as possible, if the TDS is & will be deducted u/s. 194 I(a), there is no alternative.
It is renting of machinery & not House property only.

13 July 2024 I will ask him to update his GST registration. Will show this full transaction amount of 2.85 lakhs under other sources as It won't accept u/s 44AD, Thank You sir for reverting to my doubts, and queries so patiently.

13 July 2024 It is doubtful now, whether the system will accept the income under IFOS, as for the TDS section over the income. So, be careful. Good Luck.

13 July 2024 Yess.. Thank you Rambhia Sir.

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