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Income u/s 44AD ??

andy (Designer) (130 Points)

30 September 2011

Hi Guys,

I'm a freelancer graphic designer mostly working for international clients & get paid in USD then money is transfered to my bank a/c in india through PayPal. Now my avocate has just filed an A.Y 2011-12 return & has shown my income u/s 44AD which i doubt is incorrect but why would he do so. Can you guys pls help me by looking at the cc below.

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Income from Business or Profession (Chapter IV D) - XXXX (Amount more than10,000)

Income u/s 44AD

Total Income

Round Off u/s 288A

and further stated that....there is no tax liabilty on 44AD income amount XXXX according to section 44AD(4)

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If i'm not wrong, Kindly pls suggest how can i go about correction thing.

Thanks

Andy

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12 Replies

Milan Somani (CA) (1456 Points)
Replied 01 October 2011

If its not a Auditable case i.e. turnover<60 Lacs than its a case of presumptive taxation (sec 44AD)

andy (Designer) (130 Points)
Replied 02 October 2011

Yes my account doesn't need an auditing. but what's presumptive taxation?

Has my ITR been filed under correct section?

Milan Somani (CA) (1456 Points)
Replied 02 October 2011

Yes its filed correctly.

ashish gupta ( student) (1922 Points)
Replied 02 October 2011

dont worry return is filed correct

Vikas (CA) (1135 Points)
Replied 02 October 2011

Sorry friend,

I think the return filed is incorrect, becuase you are a professional and the tax audit limit for you would be Rs. 15 lakhs,

and the Sec.44AD benefit has only been given to the business income and not professional income..

Correct me if i m wrong...

Milan Somani (CA) (1456 Points)
Replied 02 October 2011

44AD is applicable in case of both business & profession

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 02 October 2011

44AD is applicable only for business and not for profession. Its clearly define in Income tax act. The nature opf transaction i.e. freelancer photographer is deemed to be a profession under the income tax act coz its requires a speacialised skills.

The gist of section 44AD is as follows which applicable only foir business

²⁶ [ ²⁷ Special provision for computing profits and gains of business on presumptive basis.

44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.

(b) “eligible business” means,—

(i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE; and

(ii) whose total turnover or gross receipts in the previous year does not exceed an amount of ²⁸ [sixty lakh rupees].]

thus , profession would not cover under this and hence u cant enjoy the benefits of section 44AD.

regards,

Manoj

Vikas (CA) (1135 Points)
Replied 02 October 2011

Thanks Manoj.... and my friend Milan,

Please refer the Section 44AD properly, the benefit is only available to the business and not profession....

andy (Designer) (130 Points)
Replied 03 October 2011

@ Vikas, Manoj

Thanks for this info. Kindly pls help me as in what should i do next, I can answer you in PM if you need to know anything specific. Pls help me out, I'll be obliged.

Regards

Andy

andy (Designer) (130 Points)
Replied 04 October 2011

Hey,

Can anyone please suggest me something. How can i now go for revision.?

rupesh gupta (tax advocate) (103 Points)
Replied 04 October 2011

44AD applies only for business income not profession.

Vikas (CA) (1135 Points)
Replied 20 October 2011

Andy, first of all u should take help.of a CA while filing ur return... secondly there is an option that u can file a revised return now ur profit n loss ac n balance sheet will b prepared. u also might b liable to pay tax...so take a help of a CA for such calculation... thirdly u can wait for the inckme tax notice to come...then u can explain ur mistake...but its too risky....so my advise is that u should talk to a CA...

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