Presumptive taxation
This query is : Resolved
07 February 2012
Hello All,
I have two bank accounts, one is a personal savings account and another is a current account for my partnership firm. I have income coming into both my accounts.
My queries are:
1) Can payments made to my name into my savings account still be considered revenue to my partnership firm? Because i have some payments made to my name and some to the current account.
2) Presumptive Taxation covers business and "individuals" who are not professionals. Who are considered individuals? Are consultants not considered individuals?
3) How is tax calculated under Presumptive taxation? If say the gross turnover is Rs.100,000, and considering we take 8% of it as total income, do I have to pay a tax according to slab rate on taxable income of Rs.8000? Or is Rs. 8000 the actual amount of tax that I am supposed to pay?
4) Is salaries made to partners exempted while calculating gross receipt or total turnover?
5) Lastly, if I own two different partnership firms earning total turnover of Rs. 40 L and Rs. 30 L respectively, will each partnership firm, although owned by same person/s, be eligible for Presumptive Taxation? Or will they be treated as ineligible because the combined turnover is in excess of Rs. 60 L?
Sorry about the detailed and long query!
Many thanks!
- Raj
I have two bank accounts, one is a personal savings account and another is a current account for my partnership firm. I have income coming into both my accounts.
My queries are:
1) Can payments made to my name into my savings account still be considered revenue to my partnership firm? Because i have some payments made to my name and some to the current account.
2) Presumptive Taxation covers business and "individuals" who are not professionals. Who are considered individuals? Are consultants not considered individuals?
3) How is tax calculated under Presumptive taxation? If say the gross turnover is Rs.100,000, and considering we take 8% of it as total income, do I have to pay a tax according to slab rate on taxable income of Rs.8000? Or is Rs. 8000 the actual amount of tax that I am supposed to pay?
4) Is salaries made to partners exempted while calculating gross receipt or total turnover?
5) Lastly, if I own two different partnership firms earning total turnover of Rs. 40 L and Rs. 30 L respectively, will each partnership firm, although owned by same person/s, be eligible for Presumptive Taxation? Or will they be treated as ineligible because the combined turnover is in excess of Rs. 60 L?
Sorry about the detailed and long query!
Many thanks!
- Raj
07 February 2012
For your quaries clear and detail clarification please approach a CA he can help you in you quaries and clarify your doubts depending on the facts and he will suggest you how to approach to minimise tax, etc.....
OM SAI SRI SAI JAI JAI JAI SAI
OM SAI SRI SAI JAI JAI JAI SAI
07 February 2012
Hi,
My queries were not individual or account specific. These are very general questions:
- Can payments made to an individual be considered payments made to the firm?
- Presumptive tax covers individuals. Who qualify as individuals?
etc.
I know I can approach a CA, but the reason I posted here is because I want an expert opinion from here as well. This query is definitely not resolved.
My queries were not individual or account specific. These are very general questions:
- Can payments made to an individual be considered payments made to the firm?
- Presumptive tax covers individuals. Who qualify as individuals?
etc.
I know I can approach a CA, but the reason I posted here is because I want an expert opinion from here as well. This query is definitely not resolved.
10 August 2024
Certainly! Here’s a detailed response to each of your queries regarding presumptive taxation and related accounting matters:
### **1. Payments to Personal Savings Account**
**Can payments made to your name into your personal savings account be considered revenue to your partnership firm?**
No, payments made directly to your personal savings account cannot be automatically considered as revenue for your partnership firm. For accounting purposes:
- **Partnership Firm’s Revenue:** Revenue for the partnership firm should be recorded in the firm's books of accounts. Payments related to the firm's business activities should ideally go into the firm’s current account.
- **Personal Payments:** If payments are made to your personal account and are related to the firm’s business, they should be recorded as a personal withdrawal or advance in the firm's books and not as revenue. To maintain clear and accurate accounting records, it is advisable to channel all business transactions through the firm’s current account.
### **2. Presumptive Taxation and Individuals**
**Who qualifies as "individuals" under presumptive taxation?**
- **Individuals:** Under Section 44AD of the Income Tax Act, "individuals" typically refer to individual taxpayers (excluding companies and firms other than partnership firms) who are engaged in a business.
- **Consultants:** Consultants are generally considered individuals if they are not classified as professionals under Section 44ADA. If the consultant’s income falls under a business and they do not fall under the category of specified professionals (like doctors, lawyers), then they would qualify as individuals for Section 44AD.
### **3. Tax Calculation Under Presumptive Taxation**
**How is tax calculated under presumptive taxation?**
- **Section 44AD:** For a business with a gross turnover of ₹1,00,000, if you opt for Section 44AD, the presumptive income would be 8% of the gross turnover. In this case:
- **Presumptive Income:** ₹8,000 (8% of ₹1,00,000)
- **Tax Calculation:** The presumptive income of ₹8,000 is added to your total income and taxed according to the applicable income tax slab rates.
- **Tax Payment:** You do not pay ₹8,000 as tax; instead, you pay tax based on the income slab applicable to ₹8,000. If ₹8,000 is your only income, you will apply the slab rates to this amount.
### **4. Salaries to Partners and Gross Receipts**
**Are salaries paid to partners exempt from being included in gross receipts or total turnover?**
- **Salaries to Partners:** Salaries paid to partners are not considered an expense for computing the gross receipts or turnover of the partnership firm. Gross receipts or turnover are determined based on the total amount of income received from the business activities before deducting any expenses, including partners' salaries.
### **5. Presumptive Taxation for Multiple Partnership Firms**
**If you own two different partnership firms with turnovers of ₹40 lakh and ₹30 lakh respectively, will each firm be eligible for presumptive taxation?**
- **Eligibility:** Each partnership firm is assessed independently for eligibility under presumptive taxation schemes.
- **Under Section 44AD:** Each partnership firm is eligible if its gross receipts do not exceed ₹2 crore. In your case, both firms, with turnovers of ₹40 lakh and ₹30 lakh, are eligible for presumptive taxation under Section 44AD, as each firm’s turnover is below the ₹2 crore limit.
- **Combined Turnover:** The combined turnover of ₹70 lakh (₹40 lakh + ₹30 lakh) does not affect the eligibility of each firm separately. Each firm qualifies independently if it meets the prescribed limits.
### **Summary**
- **Payments to Personal Account:** Should not be treated as firm revenue; use firm’s current account for business transactions.
- **Individuals Under Presumptive Taxation:** Include individuals and generally exclude professionals as per Section 44ADA.
- **Tax Calculation:** Under presumptive taxation, pay tax according to the slab rate on the presumptive income, not the presumptive income amount directly.
- **Salaries to Partners:** Do not affect gross receipts or turnover calculations.
- **Multiple Firms:** Each firm is independently eligible for presumptive taxation if it meets the turnover limit.
For specific advice tailored to your individual situation, consulting with a Chartered Accountant (CA) is always recommended.
### **1. Payments to Personal Savings Account**
**Can payments made to your name into your personal savings account be considered revenue to your partnership firm?**
No, payments made directly to your personal savings account cannot be automatically considered as revenue for your partnership firm. For accounting purposes:
- **Partnership Firm’s Revenue:** Revenue for the partnership firm should be recorded in the firm's books of accounts. Payments related to the firm's business activities should ideally go into the firm’s current account.
- **Personal Payments:** If payments are made to your personal account and are related to the firm’s business, they should be recorded as a personal withdrawal or advance in the firm's books and not as revenue. To maintain clear and accurate accounting records, it is advisable to channel all business transactions through the firm’s current account.
### **2. Presumptive Taxation and Individuals**
**Who qualifies as "individuals" under presumptive taxation?**
- **Individuals:** Under Section 44AD of the Income Tax Act, "individuals" typically refer to individual taxpayers (excluding companies and firms other than partnership firms) who are engaged in a business.
- **Consultants:** Consultants are generally considered individuals if they are not classified as professionals under Section 44ADA. If the consultant’s income falls under a business and they do not fall under the category of specified professionals (like doctors, lawyers), then they would qualify as individuals for Section 44AD.
### **3. Tax Calculation Under Presumptive Taxation**
**How is tax calculated under presumptive taxation?**
- **Section 44AD:** For a business with a gross turnover of ₹1,00,000, if you opt for Section 44AD, the presumptive income would be 8% of the gross turnover. In this case:
- **Presumptive Income:** ₹8,000 (8% of ₹1,00,000)
- **Tax Calculation:** The presumptive income of ₹8,000 is added to your total income and taxed according to the applicable income tax slab rates.
- **Tax Payment:** You do not pay ₹8,000 as tax; instead, you pay tax based on the income slab applicable to ₹8,000. If ₹8,000 is your only income, you will apply the slab rates to this amount.
### **4. Salaries to Partners and Gross Receipts**
**Are salaries paid to partners exempt from being included in gross receipts or total turnover?**
- **Salaries to Partners:** Salaries paid to partners are not considered an expense for computing the gross receipts or turnover of the partnership firm. Gross receipts or turnover are determined based on the total amount of income received from the business activities before deducting any expenses, including partners' salaries.
### **5. Presumptive Taxation for Multiple Partnership Firms**
**If you own two different partnership firms with turnovers of ₹40 lakh and ₹30 lakh respectively, will each firm be eligible for presumptive taxation?**
- **Eligibility:** Each partnership firm is assessed independently for eligibility under presumptive taxation schemes.
- **Under Section 44AD:** Each partnership firm is eligible if its gross receipts do not exceed ₹2 crore. In your case, both firms, with turnovers of ₹40 lakh and ₹30 lakh, are eligible for presumptive taxation under Section 44AD, as each firm’s turnover is below the ₹2 crore limit.
- **Combined Turnover:** The combined turnover of ₹70 lakh (₹40 lakh + ₹30 lakh) does not affect the eligibility of each firm separately. Each firm qualifies independently if it meets the prescribed limits.
### **Summary**
- **Payments to Personal Account:** Should not be treated as firm revenue; use firm’s current account for business transactions.
- **Individuals Under Presumptive Taxation:** Include individuals and generally exclude professionals as per Section 44ADA.
- **Tax Calculation:** Under presumptive taxation, pay tax according to the slab rate on the presumptive income, not the presumptive income amount directly.
- **Salaries to Partners:** Do not affect gross receipts or turnover calculations.
- **Multiple Firms:** Each firm is independently eligible for presumptive taxation if it meets the turnover limit.
For specific advice tailored to your individual situation, consulting with a Chartered Accountant (CA) is always recommended.
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