Sec 44ad

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

10 January 2014 hi My friend have proprietorship firm trading of poultry feed materials march-13
Turnover is 34 Lacks Profit is 55000/- and Salary income is 1.23 lacks he filed is own in ITR-4 and he is not paid income tax
i know this is wrong he is covered under sec 44 ad he have to calculate 8% of gross receipts total income is 395000 and he can claim under sec 80c is 25000/-lic school fee
net income is 370000 and tax is 17510/-inc cess but asked any option is there to reduce the tax please help him

CA TSR

CA TSR (Expert)
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10 January 2014 If the income from trading operations is really 55000 then go for 44AB audit and file 3CD with present date. Then your total income returned is 55000+123000=178000 - 25000=153000 then there is no need to pay income tax to IT department. Only expenses to your friend is audit fees (4000) + DSC (300) = 4300 is total expenditure instead of Rs. 17510/- payable to government.

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Querist : Anonymous

Querist : Anonymous (Querist)

11 January 2014 Thank you sir for replay
if he file present date
any late filing penalty is applicable or not

CA TSR

CA TSR (Expert)
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12 January 2014 Due to delay in filing of Form 3cd the department may or may not be levy penalty upto 10,000/-. As per act it is mandatory, as per my knowledge it is not yet levied in my surrounding jurisdictional areas.

Querist : Anonymous

Querist : Anonymous (Querist)

12 January 2014 Thank you sir he is filed ITR4 in 18th June 2013 but it is not processed and my friend thinking to wait for until the process
or file immediately please inform me

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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23 July 2025 To clarify your friend's situation regarding **Section 44AD**, **tax audit under Section 44AB**, and the **late filing penalty**:

### 1. **Section 44AD & Filing under ITR-4**:

* **Section 44AD** is for **small businesses** with **turnover** up to Rs. 2 Crore. The **presumptive taxation** scheme under Section 44AD allows an individual to declare income at **8% of the turnover** if they are in a **business** (other than **profession**) and meet the conditions laid out in Section 44AD.
* Your friend has a **turnover of Rs. 34 Lakhs**, which means **Section 44AD is applicable** because his turnover is less than Rs. 2 Crore.
* However, **the profit declared by your friend (Rs. 55,000)** is below the presumptive income of **8%** of Rs. 34 Lakhs, which should have been **Rs. 2.72 Lakhs** (8% of Rs. 34 Lakhs).

### 2. **Tax Computation under Section 44AD**:

* If your friend opted for **Section 44AD**, he should have **declared income at 8% of the turnover** unless he maintained **books of accounts** and could prove that his income was lower than 8%.
* Since he reported **only Rs. 55,000** as profit, it seems like he did not apply **Section 44AD** correctly. He would have needed to report **8% of Rs. 34 Lakhs** (i.e., Rs. 2.72 Lakhs) as his taxable income under the presumptive scheme, and then the remaining income from his salary would have been added on top of that.

### 3. **Tax Deduction & Section 80C**:

* After adding his **salary income** of Rs. 1.23 Lakhs, his **total income** becomes Rs. 3.95 Lakhs (Rs. 55,000 + Rs. 1.23 Lakhs).
* He can claim deductions under **Section 80C** (Rs. 25,000 for LIC premiums, school fees, etc.), which reduces his total taxable income to **Rs. 3.70 Lakhs**.
* Based on this, the tax payable after applying **tax slabs** will be approximately **Rs. 17,510**, including **cess**.

### 4. **Late Filing Penalty**:

* Since your friend has already filed the ITR after the due date (**18th June 2013**), there might be **late filing penalties**.

* **Late filing penalties** under Section 234F of the Income Tax Act are:

* **Rs. 5,000** if the return is filed after the due date but before December 31st of the assessment year.
* **Rs. 10,000** if filed after December 31st.
* However, if the total income is below **Rs. 5 Lakhs**, the penalty is reduced to **Rs. 1,000**.

* **Form 3CD** is **part of tax audit** compliance. If the **business turnover exceeds Rs. 1 Crore**, your friend should have gotten his **books audited** under **Section 44AB** and filed the tax audit report **Form 3CD**.

### 5. **Your Friend's Options**:

* **Re-file under Section 44AD**: Your friend should ideally **file the return correctly** by declaring the **presumptive income under Section 44AD** (8% of turnover) and ensure the salary income is included. He could revise the return if it was filed incorrectly, but this would be subject to the **penalty for late filing**.
* **Tax Audit**: Since his turnover exceeds **Rs. 1 Crore**, he may need to file **Form 3CD** (tax audit report) as per **Section 44AB**.
* **Penalty for Late Filing**: If he is filing after the due date, he may face a penalty, but he can **reduce** the penalty by filing the return soon.

### 6. **Filing Immediately or Waiting**:

* It's better to **file the return immediately** rather than waiting for the previous one to be processed, as **waiting** might further delay resolution.
* **Revised filing** (if required) can be done to correct the issues. The longer he waits, the higher the **penalties** might be, and it could also lead to **interest charges** under Section 234A.

### Summary:

* Your friend should ideally **declare 8% of turnover** (Rs. 2.72 Lakhs) under **Section 44AD**, adding salary income for the total taxable income.
* If he hasn't filed tax audit under **Section 44AB**, he may need to do so due to the **turnover exceeding Rs. 1 Crore**.
* **File the return immediately**, as waiting for the prior one to be processed may increase penalties.

Would you like more detailed guidance on how to proceed with filing or correcting the return?

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