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Dipam Guha Thakurata (148 Points)

17 November 2017

what is presumptive income?how to calculate tax liability on presumptive income?who can opt for this scheme?

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RAJA P M ("Do the Right Thing...!!!") (127142 Points)
Replied 17 November 2017

What is the meaning of presumptive taxation scheme?

As per sections 44AA of the Income-tax Act, 1961, a person engaged in business is required to maintain regular books of account under certain circumstances. To give relief to small taxpayers from this tedious work, the Income-tax Act has framed the presumptive taxation scheme under sections 44AD, sections 44ADAand sections 44AE.

A person adopting the presumptive taxation scheme can declare income at a prescribed rate and, in turn, is relieved from tedious job of maintenance of books of account.

scheme?

Who is eligible to take advantage of the presumptive taxation scheme of section 44AD?| Who is eligible for get the benefit section 44AD| Can an Individaul declare his profit under section 44AD?

The presumptive taxation scheme of section 44AD can be adopted by following persons :

1) Resident Individual

2) Resident Hindu Undivided Family

3) Resident Partnership Firm (not Limited Liability Partnership Firm)

In other words, the scheme cannot be adopted by a non-resident and by any person other than an individual, a HUF or a partnership firm (not Limited Liability Partnership Firm).

Further, this Scheme cannot be adopted by a person who has made any claim towards deductions under section 10A/10AA/10B/10BA or under sections 80HHto 80RRB in the relevant year.

Which businesses are not eligible for presumptive taxation scheme?

The scheme of section 44AD is designed to give relief to small taxpayers engaged in any business, except the following businesses:

Business of plying, hiring or leasing goods carriages referred to in sections 44AE.A person who is carrying on any agency business.A person who is earning income in the nature of commission or brokerageAny business whose total turnover or gross receipts exceeds two crore rupees.

Apart from above discussed businesses, a person carrying on profession as referred to insection 44AA(1) is not eligible for presumptive taxation scheme under section 44AD.

RAJA P M ("Do the Right Thing...!!!") (127142 Points)
Replied 17 November 2017

Under Profession....

Who is eligible to take advantage of the presumptive taxation scheme of section 44ADA?

The presumptive taxation scheme of sections 44ADA can be adopted by a person resident in India, carrying on specified profession whose gross receipts do not exceed fifty lakh rupees in a financial year. Following professions are specified profession:

1) Legal2) Medical3) Engineering or architectural4) Accountancy5) Technical consultancy6) Interior decoration7) Any other profession as notified by CBDT

What is the manner of computation of taxable income in case of a person adopting the presumptive taxation scheme of section 44ADA?

In case of a person adopting the provisions ofsections 44ADA, income will be computed on presumptive basis, i.e. @ 50% of the total gross receipts of the profession. However such person can declare income higher than 50%.

In other words, in case of a person adopting the provisions of sections 44ADA, income will not be computed in normal manner but will be computed @ 50% of the gross receipts.

Can a person who adopts the presumptive taxation scheme of section 44ADA claim any further deduction of expenses after declaring profit @ 50% of gross receipts?

No, a person who adopts the presumptive taxation scheme is deemed to have claimed all deduction of expenses. Any further claim of deduction is not allowed after declaring profit @ 50%.

If a person adopts the presumptive taxation scheme of section 44ADA, then is he liable to pay advance tax in respect of income from profession covered under section 44ADA?

Any person opting for the presumptive taxation scheme under sections 44ADA is liable to pay whole amount of advance tax on or before 15th March of the previous year. If he fails to pay the advance tax by 15th march of previous year, he shall be liable to pay interest as persections 234C.

Note: Any amount paid by way of advance tax on or before 31st day of March shall also be treated as advance tax paid during the financial year ending on that day.