Presumption taxation

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Querist : Anonymous

Querist : Anonymous (Querist)

19 October 2013 If asses see has Communion income can go for presumption taxation ? please give detailed anaylises of presumption taxation,

Ganeshbabu K

Ganeshbabu K (Expert)
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19 October 2013 Not possible
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Assesse having commission business cannot use Section 44AD(presumptive taxation) As it is not a eligible business
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and says 44AD not applicable to commission business in 44AD(6)(ii)

Querist : Anonymous

Querist : Anonymous (Querist)

19 October 2013 commssion and job work income combined can use presumption bussiness

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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10 August 2024 In accounting and taxation, when dealing with commission and job work income, the question of whether you can use the presumption business method largely depends on the specific regulations and circumstances in your jurisdiction. In the context of Indian tax laws, here’s a detailed look at how these types of income are treated and whether the presumption business method can be applied.

### **Understanding Commission and Job Work Income**

1. **Commission Income:**
- **Nature:** Commission income is typically earned by acting as an agent or intermediary in a transaction or for services rendered, such as sales commission.
- **Tax Treatment:** Commission income is generally treated as business income under the Income Tax Act, 1961, and is subject to tax under the head “Profits and Gains of Business or Profession.”

2. **Job Work Income:**
- **Nature:** Job work income is earned from providing manufacturing or processing services on behalf of others. The job worker processes goods according to the specifications provided by the principal and earns income for the work done.
- **Tax Treatment:** Job work income is also considered business income and is taxed under the head “Profits and Gains of Business or Profession.”

### **Presumptive Taxation Schemes**

In India, there are several presumptive taxation schemes under the Income Tax Act, 1961, where income is presumed based on certain criteria, simplifying the tax calculation and compliance process. These schemes include:

1. **Section 44AD:**
- **Applicability:** This section provides a presumptive taxation scheme for resident individuals, Hindu Undivided Families (HUFs), and partnership firms (other than LLPs) engaged in any business, other than the profession referred to in section 44AA(1) and section 44AE.
- **Presumptive Income:** Income is presumed to be 8% of the gross receipts or turnover of the business.

2. **Section 44AE:**
- **Applicability:** This scheme applies to businesses engaged in the transportation of goods.
- **Presumptive Income:** Income is presumed to be a fixed sum per vehicle.

3. **Section 44ADA:**
- **Applicability:** This section is for professionals (e.g., accountancy, interior decoration) with gross receipts not exceeding Rs. 50 lakh.
- **Presumptive Income:** Income is presumed to be 50% of the gross receipts.

### **Application to Commission and Job Work Income**

- **Commission Income:**
- **Section 44AD:** Commission income can be covered under Section 44AD if it pertains to a business where the gross receipts do not exceed Rs. 2 crore. The taxpayer can opt for this scheme and declare income at 8% of the gross receipts.
- **Other Sections:** For commission income from specific activities not covered under Section 44AD, taxpayers may need to maintain books of accounts and compute income based on actuals.

- **Job Work Income:**
- **Section 44AD:** Job work income can also be covered under Section 44AD if it is a part of a business where the gross receipts do not exceed Rs. 2 crore. The income can be presumed at 8% of the gross receipts.
- **Other Sections:** If job work is not covered under Section 44AD, the taxpayer must maintain proper books of accounts and compute income based on actuals.

### **Combining Commission and Job Work Income**

If a taxpayer earns both commission and job work income, the presumption scheme under Section 44AD can generally be applied to the total gross receipts, provided the total gross receipts do not exceed Rs. 2 crore and the business is not specifically excluded from the scheme. This means:

1. **Single Presumptive Scheme:** Both commission and job work incomes can be included in the presumptive taxation scheme under Section 44AD if they are part of the same business entity and the gross receipts do not exceed the threshold limit.

2. **Separate Income Streams:** If the commission and job work income are from different business activities or entities, they might need to be evaluated separately. For example, commission income might be subject to different tax rules if it does not qualify for Section 44AD.

### **Practical Steps**

1. **Determine Eligibility:** Assess whether the total gross receipts for commission and job work fall under the threshold limit for Section 44AD.
2. **Maintain Records:** Even under presumptive schemes, maintain proper records of income and expenses to substantiate the income declared.
3. **File Returns Accordingly:** Opt for the presumptive taxation scheme if eligible and file your tax returns based on the presumptive income.

### **Summary**

- Commission and job work incomes can generally use the presumption business method under Section 44AD, provided the total gross receipts do not exceed Rs. 2 crore and the business qualifies under the scheme.
- For incomes that do not fall under the presumptive schemes, proper accounting and tax computation are required.

Always consult with a tax professional or accountant to ensure compliance with the latest regulations and to receive personalized advice based on your specific situation.

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