Official income under presumptive taxation for investment purpose?

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This discussion clarifies the concept of 'official income' when using presumptive taxation schemes like 44ADA and 44AD. While you declare a lower, presumptive income for tax purposes, the actual amount received (e.g., £10 lakhs) is considered your 'white income' for investment. This is a tax concession allowing professionals and small businesses to avoid detailed record-keeping, not a contradiction in your tax returns.

ADNAN HUSSAIN

ADNAN HUSSAIN (Querist)
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19 June 2022 Hello,

If we declare income under 44ADA, then what will be offical income i.e actual income or presumptive declared income??

Then what will be the official income? White income...

Example:- credit received 10 lakhs

Declared u/s 44ADA 50% i e 5 lakhs

So what is the official income for investment purpose?

Actual income is 10 lakhs declared in IT 5 lakhs

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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20 June 2022 10 lacs is white income you can invest no question will be asked.

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ADNAN HUSSAIN

ADNAN HUSSAIN (Querist)
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20 June 2022 but isnt it contradictory in IT returns we are showing 5 lakhs as income and using 10 lakhs as official income

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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20 June 2022 It's not contradictory it's tax concession allowed to small business and professional.

ADNAN HUSSAIN

ADNAN HUSSAIN (Querist)
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20 June 2022 Then in case of 44AD, if turnover is 1 crore and net profit is 8 lakhs i.e 8%, then here is Rs. 1 crore white income???

CA Puja Sharma

CA Puja Sharma (Expert)
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20 June 2022 Yes, Rs. 10 Lacs will be treated as your genuine income. The government is giving relief to small taxpayers by this presumptive scheme where they can show 50% of their turnover as profit without maintaining any books of accounts.

ADNAN HUSSAIN

ADNAN HUSSAIN (Querist)
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20 June 2022 Then what about this case??

Then in case of 44AD, if turnover is 1 crore and net profit is 8 lakhs i.e 8%, then here is Rs. 1 crore white income???

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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20 June 2022 The normal profitability can't be 92% of turnover.
It will be normally 10 to 20 percent of turnover.
It's encouraged to declare more profit than 8% under 44AD.

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