Treatment of loss occured in business covered u/s 44ad

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CA JINKAL HALAPARA (Querist)

23 April 2016 Can the loss occured in Business covered u/s 44AD be set off against the income under the head Income from other Sources???
For Example:
Gross Receipts: 100000
Deemed Profit 8% : 8000
(-)Interest allowable u/s 40(b): (10000)
Net: (2000)

Income from other Source: 5000

What is advisable in this case???

Suresh Ramaswamy

Suresh Ramaswamy (Expert)

24 April 2016 When an assessee opts for presumptive taxation u/s 44AD, he maintains no books of accounts and hence his profit is deemed to be 8% of the turnover. In determining this profit it is also presumed that all deductions from section 28 to 38 has been given effect to. Additional deduction will be allowed for interest payable under section 40(b) in case of firms. Therefore if the interest payable does not exceed 12% the excess can be set off against Income from Other Sources.

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Kaushik Joshi

Kaushik Joshi (Expert)

25 April 2016 yes I agree with ramaswamy Sir. however since current year, even this partner interest is not to be considered for deemed profit at a later stage. also 44ad is not applicable for a period of five consecutive years if it's not taken in current year. so keep the new updates in mind in case you are tax planning...

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