Related to section 44ad( merged with section 44af)

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This query is : Resolved

CA.Kanhaiyalal Gupta (Querist)

17 April 2012 Dear All,

I need clarification on following matters:-

Suppose Mr. A,is doing retail business and his sales is Rs. 36,00,000 as per section 44AD 8% = 288000 but actually his net income after deducting expenses is Rs. 220000.

My question is that :-

1)If Mr. A, declare his income of Rs. 220000 audit is required ?

2) Suppose if Mr. A, declare Rs. 288000 can Mr. A eligible for deduction under section 80C, 80D and 80DDB

CA. Sameer Kashikar

CA. Sameer Kashikar (Expert)

18 April 2012 Dear Kanhaiyalal,

If the assessee wants to declare lower income than the deemed profits as calculated above, he will have to maintain the books of account as per s. 44AA and get the accounts audited as per s. 44AB irrespective of turnover if his total income exceeds basic exemption limit.

in your case for point No. 1 Audit will be applicable

for point No. 2
Section 44AD is for calculation of business Income and not for calculation of total Income
hence
all deductions u/ss. 80CCC to 80U shall be allowed

Murtaza I Bhagat

Murtaza I Bhagat (Expert)

18 April 2012 agree

1. yes you are right audit applicable
2. sec. 44AD for 8% deemed profit is only on sales/receipts not for net taxable income. 8% is gross income and then calculate deduction after deduction you will have to calculate tax as per slab