I received a defective return notice for ITR-3 filed, error codes 180 and 310. The income is filed under section 44ad but my CA didn'll fill the "P and L" (section 53 under no account case) and no gross receipts etc were filled in. Now I need to fill that section to rectify it. I want to ask what is the difference between "gross profit" and "net profit"? I declared a profit of 12.86% which is over 8% as required under section 44ad. So I will will fil the gross receipts but what whould be filled in "gross profit", "expenses" and "net profit"? Please help.
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How to show 'gross profit' and 'net profit' under sec 44ad
Replies (2)
gross profit same as gross receipts
Hi Reena,
First of all I would like to clarify your doubt on difference between the terms Gross Profit and Net Profit. If you are a carrying on trading business, then your Gross Profit = Sales (-) Cost of Goods Sold or Sales (-) (Opening Stock (+) Purchases (+) Direct Expenses - Closing Stock).
In order to arrive at the Net Profit, deduct all other expenses like Salary, Electricity, Advertisement, Discount Allowed, Telephone Charges, Depreciation, etc. and to add all non trading income such as Commission Received, Discount Allowed by the Supplier, etc.
In your case,
Gross Profit = 12.86% of your Turnover
Expenses = All other expenses or Non-trading Expenses
Net Profit = Gross Profit - Non Trading Expenses
As you were said, you have filed your return under provisions of section 44AD in ITR form 3, in my opinion the ITR -4 (ITR 4S for AY 2016-17) was the right one for this scenario .
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