Section 44ad with more profit

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

12 July 2016 I am an individual with Software business (4 employees).

I’m applicable to file under Section 44AD (because my turnover is less than 1 crore).

If my turnover is 50Lakhs, according to 44AD, I can just file with profit as 8% (which means pay taxes assuming profit as 4 Lakhs). But say if actual profit is 20% (10Lakhs), so does it mean the other 6Lakhs is not taxable?

Amol S Joglekar

Amol S Joglekar (Expert)
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12 July 2016 it is a presumptive taxation system. Having 20% profit, if you choose to declare an 8% profit, you are creating UNDISCLOSED income, which might trouble you in future, say after 3-4 years. Take the decision accordingly whether to supress the profit

Querist : Anonymous

Querist : Anonymous (Querist)

12 July 2016 Not trying to suppress the profits, but according to law, they say you can only pay taxes declaring the profit as 8%. So just thinking because its correct according to their rules. They also mention that we don't need to maintain book of accounts too.

Amol S Joglekar

Amol S Joglekar (Expert)
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12 July 2016 The act says 8% OR a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee......

Please also go through the case of Mcdowell for "Dubious tax practice". This was in 1985....(And see what the owner Mallya is facing now......It seems he did not learn anything from the said case)

Having a profit of more than 8 % yet declaring only 8% is NOT the intent of the section. Now choice is yours, which way to go.....

Querist : Anonymous

Querist : Anonymous (Querist)

12 July 2016 Ok got it, thanks for the explanation. I think you're right. The intention is just to see if this process is easy. Because if I deduct expenses, salaries, depreciation, profit is anyway less than 6 lakhs. So i'll just ignore 44AD.

Amol S Joglekar

Amol S Joglekar (Expert)
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12 July 2016 you are most welcome.

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