Return of Income & presumptive taxation scheme

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Querist : Anonymous

Querist : Anonymous (Querist)

10 April 2010 Hi,

As per sec 44AA in case gross receipt/gross turnover exceed specified limit assesse is required to maintian mandatory books of accounts. however in case of presumptive taxation scheme for retailers if gross turnover does not exceed 40 lakhs in that case reatilers taxable income would be 5% of total turnover and no other books of accounts to be maintained.

Now while filing return of Income for above assessse whether figures related to balance sheet and profit & loss account need to be given in ROI or not? In ROI it is specifically given that figures needs to be given in case assesse is required to maintain books of account??

Amol Gopal Kabra (CA,CS,DISA)

Amol Gopal Kabra (CA,CS,DISA) (Expert)
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10 April 2010 In the return of income, i.e. ITR-4, there is is given that figures need to be given if books of accounts are required to be maintained. However, under the provisions of presumptive taxation, if the turnover is below threshold limit of Rs.40 Lakh and the profit as derived is as per the sections, then the assessee need not maintain books of accounts. In such case, as the assessee is not required to maintain books of accounts, the he/she need not give the figures in the ITR.

CMA.Palani Arumugam

CMA.Palani Arumugam (Expert)
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10 April 2010 Agreed.

Querist : Anonymous

Querist : Anonymous (Querist)

10 April 2010 Seems contradiction in law as one section states to maintain books of accounts and other section states not to maintain books of accounts.

So in thid particular case need to ignore sec 44AA i.e. no need to maintain books of accounts? is there any case law or circular?

thanks!!

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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21 July 2025 Great question! Here's a detailed clarification about presumptive taxation, books of accounts, and filing return:

1. Section 44AA and Books of Accounts
Section 44AA mandates maintenance of books of accounts if the gross receipts or turnover exceed a certain prescribed limit.

For most professionals/businesses, if turnover exceeds ₹1.2 crore (increased limits recently, but check for your AY), books are required.

But for retailers/businesses opting for presumptive taxation under Section 44AD, if turnover is below ₹2 crore (previously ₹40 lakh), they are not required to maintain books of accounts.

2. Presumptive Taxation under Section 44AD
The taxpayer declares income at a prescribed percentage (e.g., 5% for retailers) of gross turnover.

No need to maintain detailed books of accounts or get accounts audited (if below threshold).

Income is deemed to be profit; no further additions or deductions needed.

3. Filing Return and Figures in Balance Sheet / P&L
The ITR-4 form has sections for Balance Sheet and Profit & Loss Account figures.

The instructions specify that if books of accounts are maintained (i.e., turnover above limit), these figures should be furnished.

However, in case of presumptive taxation below turnover limit, since books are not maintained, you do not need to fill these figures.

So, in such cases, you can leave those parts blank or put zero/NA as applicable.

4. Contradiction between Sections 44AA and 44AD
Section 44AD overrides Section 44AA in case of eligible taxpayers opting for presumptive taxation.

Meaning: Section 44AD specifically provides exemption from maintenance of books if turnover is within limits and presumptive scheme is opted.

This has been clarified by CBDT in various circulars and judicial rulings supporting the scheme's intent to reduce compliance burden.

5. Case Law / Circulars
CBDT Circular No. 7/2015 clarifies that taxpayers opting for presumptive taxation under 44AD are exempted from maintaining books and audit if turnover limits are not exceeded.

ITAT rulings have supported the view that books need not be maintained under presumptive scheme within turnover limits.

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