Sec 44ad for ay 2017-18

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 April 2016 An eligible assessee may opt for this scheme, that means it is applicable at the discretion of the assessee running an eligible business. Is this assumption right?
Now a medical practitioner has gross fee of 10 lakhs and maintains proper records as per sec 44AA but his profit is less than 50% of gross earnings, due to expenditure on rent/ car/ medicines/ salaries to staff etc and so does not opt for benefit of 44AD. His profit , say, is about 30% of gross fee. He is not required to get his accounts audited as his gross earning is less than 25 (now 50) lakhs.and he is not opting for 44AD, files his tax return using ITR 4 and not 4S Will he still be compulsorily required to get his accounts audited or declare 50% of gross fee as his income, even if he is not opting for use of 44AD? If so, then how can one say that sec 44AD is discretionary -- it can result in heavy penalty/ cost/ inconvenience to small tax payer professionals whose profit margin is much lower than 50% Kindly enlighten with your views re. correct interpretation of sec 44AD,
Can he file ITR 4 as per accounts maintained by him but with out audit?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
Follow

17 April 2016 1 The assumption is right it is optional.
2 He has to file ITR 4 as per accounts maintained by him but tax audit is compulsory in view of declaration of lower profit.
I don't agree with your argument of heavy penalty/cost/inconvenience to small tax payer subject to tax audit.
Audit fees is not much high and you are already maintaining accounts you will not face any inconvenience and auditors will help you and file audit report.
By declaring lower profit you are opting out of 44AD that is why tax audit is applicable.

Querist : Anonymous

Querist : Anonymous (Querist)

17 April 2016 This means any professional with profit less than 50% of gross fee and any other business with less than 8% profit is compulsorily required to get tax audit done, even when he may not opt for sec 44AD, Any one starting a business usually incurs loss in initial years and by imposing audit requirements, law has put more burden of compliance, increasing his loss!
50% of gross fee as profit is a very high figure for most professionals. Putting additional burden of compliance on loss making outfits of small entrepreneurs can not be the intention of legislature. A person not opting for 44AD should be governed for tax audit as per normal limits laid down for the purpose.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
Follow

17 April 2016 Loss making outfits will not fall within the ambit of tax audit. Tax audit required only when their income exceeds basic exemption limit and their profit declared is less than the limit as per 44AD.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now