Presumptive taxation for partnership firm
This query is : Resolved
25 December 2018
Respected sir
As you know that as per provisions of section 44AD of the Income Tax Act, 1961, we have to show minimum 8% net income of the total gross receipts. In case of a partnership firm, Whether it is Book profit or Net profit ?
My question is that – In case of a partnership firm, whether this 8% net income should be treated after deduction remuneration to partners or prior to this deduction.
Suppose, in above query after deduction of remuneration, total income comes less than 8%, then whether the firm is needed for audit or not ?
As you know that as per provisions of section 44AD of the Income Tax Act, 1961, we have to show minimum 8% net income of the total gross receipts. In case of a partnership firm, Whether it is Book profit or Net profit ?
My question is that – In case of a partnership firm, whether this 8% net income should be treated after deduction remuneration to partners or prior to this deduction.
Suppose, in above query after deduction of remuneration, total income comes less than 8%, then whether the firm is needed for audit or not ?
25 December 2018
From the AY 2018-19, the law has been amended and the prescribed rate of 8% is applicable for the net profit and not for the book profit hence if profit after remuneration is below 8% of the turnover, then books of accounts should be audited as per proviso to section 44AD.
26 December 2018
Entirely agree with Mr. Mohit Bansal's view, only to add is that the audit is required only in case your turn over is more than Rs. 1 Crore even if your profit is less than 8% of your turn over.
So to summarize:
Turnover is Less than Rs. 1 Crore: You may opt for 44AD and show 8% or 6% profit and file ITR 4 or You may show less than 8% profit in such case you have to file your balance sheet and profit and loss account in ITR 3. NO audit is required.
Turnover is more than Rs. 1 Crore but upto Rs. 2 Crore: You may opt for 44AD and show 8% or 6% profit and file ITR 4 No Audit is required. If you want to show less profit, Audit is compulsory.
Turnover is more than Rs. 2 Crore: Must maintain books and get them audited.
So to summarize:
Turnover is Less than Rs. 1 Crore: You may opt for 44AD and show 8% or 6% profit and file ITR 4 or You may show less than 8% profit in such case you have to file your balance sheet and profit and loss account in ITR 3. NO audit is required.
Turnover is more than Rs. 1 Crore but upto Rs. 2 Crore: You may opt for 44AD and show 8% or 6% profit and file ITR 4 No Audit is required. If you want to show less profit, Audit is compulsory.
Turnover is more than Rs. 2 Crore: Must maintain books and get them audited.
26 December 2018
Sir , while calculating Tax on Total Income in case of partnership firm does we need to add back partners salary and remuneration in 8 % of profit declared as it is disallowed since the proviso to sec 44AD got deleted.
26 December 2018
Yes if you are opting for presumptive taxation Scheme u/s 44 AD you are not allowed the remuneration and interest deduction additionally as it was allowed earlier. Now, if your turnover is 80 Lakhs and if you are opting for presumptive taxation you must show a profit of 640000 or 540000 (In case you are receiving money in the bank using clearing method). No additional Remuneration and Interest to Partners is allowed as deduction.
26 December 2018
Thank you very much sir...
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- DELIVERY GOLD & SILVER AND OTHER ETF TRADING PROFIT AS BUSINESS INCOME
- GSTR-1A How to update Invoice
- Excess salary payment.
- 3cd- cash system of accounting is allowed?
- Provision for loans that are under Revenue Recovery
- APPLICABILITYOF GST ON STUDENT HOSTEL FEES
- Form 121-contradictory opinions
- Current Account Opening for Sole Proprietorship with Udyam Certificate - Zero Turnover
- Stamp Paper for partnership firm change new income tax 2025
- TDS on Purchase of Immovable Property by NRI from NRI
- Cash gift by grand mother to her grand daughter
- Tax amount diff in Gstr1 and 3B in tax compare reports
- Tds on GST in connection with sale to public company
- Restoration of certificate of practice
- Regarding change in correspondence address in SSP portal
- No Compliences after incorporation
- USEFUL LIFE OF USED/SECOND HAND COMMERCIAL VEHICLES
- Claiming TDS deducted by builder on Hardship compensation and Corpus
- Address Change to another state of a Registered Trust with 12AB approval
- Updated return in budget 2026
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
CAclubindia
