Is there any restriction in terms of limit of investment in case of a professional adopting 44 ada?

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Dr.Jyothish Vijay

214 Points Joined July 2010

I am a professional (doctor) earning professional income. My total gross receipt is <rs.50 Lac last FY. I intent to use section 44 ADA and pay tax for 50% deemed profit. Now let me state my problem via an illustration

Illustration:

Suppose i earned Rs.48 Lac last year. My deemed profit @ 50% would be Rs.24 lac. And therefore i would be paying tax for rs.24 lac. But can the net invested amount by me last year be say rs.30 lac? (ie bank deposits+ other investments like LIC , Mutual funds etc).

I had read through the section 44 ADA and this document as well

https://www.caclubindia.com/forum/files_download.asp?msg_id=1788139

All those very clearly mentions that I can very well claim 50% profits under 44 ADA. Only thing unclear is that if i have investments of 30 lac, its a clear statement that I had profits above 50%....My question is whether i am under legal obligation to give taxes for my entire (>50%) profits? I know that i could volunatrily declare more than 50% profits under 44 ADA....but should i mandatorily give taxes for rs.30 lac n the above example-?-that is the question

Can i opt to keep the 6 lakhs just like that (rs.30 lac-rs24 lac)?

Of course....there is no clause anywhere that says a person in my situation needs to pay more.....that was my belief,,,But i had to ask this now....because i saw the following post elsewhere:

https://www.taxtuts.in/2018/01/section-44ada.H T M L

So kindly clarify!!!

Replies (6)

Ravi SADhiyan

Practice

4510 Points Joined July 2017

Section 44ADA allow to show profit more than 50 % in total Receipt

If Your Receipt note more than Rs. 50 Lakh

So above Income Under tha Head of PGBP

You are eligible only deduction which is mentioned under the chapter of Deduction ( sec-80 )

Dr.Jyothish Vijay

214 Points Joined July 2010

Please read my querry carefully. I know I "can" show more than 50% profits...i know that...its explicitly mentioned in section 44 ADA. The question is whether i should "mandatorily" show profits above 50% ...."can" and "mandatory" are different....hope you understand my point.

I had also given an ilustration along with my querry..please refer to that....In the context of that illustration, my querry is whether i can pay taxes for only rs.24 lac and rs.30 lac seen in my bank accounts/investments etc?

I know that lot of "depreciations" (car, ultrasound machines etc) can be claimed as expenses---therefore my bank deposit for one year could be more than 50% of profits. and yet i could have high "expenses".....Its just that i need to know the opinion of experts here !!!

Also ,,,,reposting links from previous posts:

https://www.caclubindia.com/forum/files/419621_20180106211358_new_winrar_zip_archive.rar

https://www.taxtuts.in/2018/01/section-44ada.H T M L

Ravi SADhiyan

Practice

4510 Points Joined July 2017

Originally posted by : Dr.Jyothish Vijay
	Please read my querry carefully. I know I "can" show more than 50% profits...i know that...its explicitly mentioned in section 44 ADA. The question is whether i should "mandatorily" show profits above 50% ...."can" and "mandatory" are different....hope you understand my point. I had also given an ilustration along with my querry..please refer to that....In the context of that illustration, my querry is whether i can pay taxes for only rs.24 lac and rs.30 lac seen in my bank accounts/investments etc? I know that lot of "depreciations" (car, ultrasound machines etc) can be claimed as expenses---therefore my bank deposit for one year could be more than 50% of profits. and yet i could have high "expenses".....Its just that i need to know the opinion of experts here !!! Also ,,,,reposting links from previous posts: https://www.caclubindia.com/forum/files/419621_20180106211358_new_winrar_zip_archive.rar https://www.taxtuts.in/2018/01/section-44ada.H T M L

You pay Tax on Rs. 24 Lakh

Ravi SADhiyan

Practice

4510 Points Joined July 2017

The presumptive income computed @ 50% is the final income and no further expenses will
be allowed

Saifullah Khalid

Autodidact/Curious

638 Points Joined October 2014

Originally posted by : Dr.Jyothish Vijay
	I am a professional (doctor) earning professional income. My total gross receipt is Illustration: Suppose i earned Rs.48 Lac last year. My deemed profit @ 50% would be Rs.24 lac. And therefore i would be paying tax for rs.24 lac. But can the net invested amount by me last year be say rs.30 lac? (ie bank deposits+ other investments like LIC , Mutual funds etc). I had read through the section 44 ADA and this document as well https://www.caclubindia.com/forum/files_download.asp?msg_id=1788139 All those very clearly mentions that I can very well claim 50% profits under 44 ADA. Only thing unclear is that if i have investments of 30 lac, its a clear statement that I had profits above 50%....My question is whether i am under legal obligation to give taxes for my entire (>50%) profits? I know that i could volunatrily declare more than 50% profits under 44 ADA....but should i mandatorily give taxes for rs.30 lac n the above example-?-that is the question Can i opt to keep the 6 lakhs just like that (rs.30 lac-rs24 lac)? Of course....there is no clause anywhere that says a person in my situation needs to pay more.....that was my belief,,,But i had to ask this now....because i saw the following post elsewhere: https://www.taxtuts.in/2018/01/section-44ada.H T M L So kindly clarify!!!