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44ad confusion

Hitesh Arora (Article) (86 Points)

17 March 2016

Turnover = 100000

Book Profit = 12000

I want to show my income u/s 44AD

So which income will be part of Business/Profession-12000 or 8000(100000*8%) & why??

Please reply as soon as possible

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8 Replies

furquan ahmad (Article Assistant) (129 Points)
Replied 17 March 2016

8000, because it is beneficial for us(tax benefit 1200)

Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDH) (1372 Points)
Replied 17 March 2016

Generally, To relieve assessee from Maintenance of Books of account and easeline assessment process, Section 44AD is introduced which says- Offer 8% or More as Presumptive Income. Presumptive means: It is presumed by IT Dept, that approxiamately minimum 8% of Turnover would be Income of assessee. So if such presumption is wrong i.e if your profit is more than 8% of Total Turnover then it is your responsibility to show such higher percentage as Income u/s.44AD. If you contend that my Income is below 8% then offer such Income as Normal business Income and such Income exceed Basic exemptionl limit then you have to maintain books of accoutn u/s.44AA.

CA Neha Gupta (Managing Partner LNG & Associates) (1839 Points)
Replied 17 March 2016

It is beneficial for you to opt for 8 % as your presumptive income instead of showing Rs. 12000 as your book profit. Your tax liability Will be lower in this case.

Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDH) (1372 Points)
Replied 17 March 2016

Agree with CA.Neha Guptha

furquan ahmad (Article Assistant) (129 Points)
Replied 17 March 2016

if u claim ur income is below 8%. You will liable to tax audit

Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDH) (1372 Points)
Replied 17 March 2016

Claiming below 8% alone does not case obligation to carry Tax audit u/s.44AB. Two things must be considered. 1.Offer less than 8% as Presumptive Income AND 2. Your income after considering all heads exceeds Basic Exemption Limit i.e Maximum Amount Not Chargable to Tax. Then you are liable for Both Tax audit u/s.44AB and Maintenance of Books of accounts u/s.44AA. But if you are firm, In most of the cases, you are subject to tax audit u/s.44AB as Maximum amount not chargable to tax for Firm is "NIL"

kaustubh (B.Com) (32 Points)
Replied 18 March 2016

Thanks swami ayyappa nuli... right way to explain. To release people from maintaining books of account this 44ad was introduced but this doent mean u should show only 8% if u know u are earning more than that then increase the % and compute the tax.

Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDH) (1372 Points)
Replied 18 March 2016

Obviously you are correct and understanding levels are good. This is good intention. If you are earning more than Eight % then offer such higher percentage as Presumptive Income. Same words you will found at act also.