Opting 44AD in case of notice to file ITR for previous years

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This discussion clarifies whether businesses receiving notices to file income tax returns (ITR) for previous years can still opt for the presumptive taxation scheme under Section 44AD. It confirms that partnership firms with turnover below £10 lakhs, even if they haven't filed for some years, can generally use 44AD. However, it's crucial to note that expenses like partner salaries and interest on capital cannot be deducted from the profit calculated under 44AD, a change introduced by the Finance Act 2015.

Guest

Guest (Querist)

25 February 2023 I have some clients running partnership business whose turnover falls less than 10 lakhs per year and who has not filed income tax returns for some years. If the assessing authority issues notices to them to file ITR in clear tax will they be eligible to file their ITR u/s 44AD?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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25 February 2023 Yes, it can be filed under 44AD.

Guest

Guest (Querist)

25 February 2023 Sir, can a partnership firm doing accounting service business (not CA) make use of this 44AD?

Guest

Guest (Querist)

25 February 2023 Disallowing salary and interest deduction from the profit has become a terrible blow to small time partnership firms. Hence many has stopped filing ITR due to the heavy taxes. Pray the government be kind enough to announce some type of amnesty scheme to solve this situation?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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25 February 2023 Yes, consider it as business and opt for 44AD.
Paying salary, rent and interest will be considered as business.

Guest

Guest (Querist)

25 February 2023 Thanks sir. But salary to working partners and interest on their capital cannot be deducted as expense due to the amendment of Finance Act 2015, no?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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26 February 2023 Salary of partners and interest not to be deducted.

Guest

Guest (Querist)

26 February 2023 One more doubt sir. If the annual turnover of this firm is seven lakhs, profit u/s 44AD @8% will be 56,000.00. Can one deduct rent, salary, interest from 56,000.00?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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26 February 2023 Nothing can be deducted.

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Guest

Guest (Querist)

27 February 2023 Thanks sir for this. Highly appreciate

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CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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27 February 2023 You are welcome...
....

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