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ITR-4 related queries

Dr. Jones (Director) (253 Points)

23 February 2010

Below are ITR-4 questions related to a contract employee with Form 16A:

1. Where does the income mentioned in Form 16A for contract employees be put ITR-4 form? Should we put it under PART PL: Profit and Loss section (under "Gross Profits" heading) or somewhere else?

2. If the person's income is less than 1,60,000 is he liable to maintain book of accounts as per Section 44AA or 44AB?

3. Is It Mandatory for Professionals to Show Balance Sheet In ITR-4 if his income is under 1,60,000. He has no detail about debtors & creditors.?

I really appreciate your help!

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11 Replies

Ameet (L) (1678 Points)
Replied 23 February 2010

1) Yes u hve to put in PL

2) accd to me it is non-specified profession hence, provision is if income exceedsRs. 120000/- in all the three yrs immediately precedent to previous yr- then required to maintain books of accounts enabling AO to compute their taxable income. Board has not prescribed specified books of account.

3) It is not mandatory to prepare BS. But i will suggest to prepare becz in bank(Specific for loan), AO and others will ask for BS first. BS itself will help more to assessee. If does not have any detail abt debtor and creditor the do by Balancing Method for first year that is take right hand side Bank,Cash,Invt,FA, and take balance on liability side as capital and start. After subsequent year u just go on.

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Amir (Learner) (4016 Points)
Replied 23 February 2010

Dear Dr. Jones,

To start with we should clearly differetiate between two terms -

1) Receipts - Gross Receipts or sales or turnover or revenue......before allowing any deduction of expenses

2) Income - Profit/Net Profit......after deducting expenses from above receipts........

Now coming to ur queries-

1) Amount mentioned in Form 16 A - The mentioned amount is "Receipt" & Not Income - It is to be shown in the first colum of Profit & Loss a/c - "Sales/ Gross receipts of business or profession"

2) Prescribed books are to be maintained u/s 44AA whereas 44AB contains the provision of Tax Audit.(where Turnover exceeds 40lacs in case of Business & 10 Lacs in case of Profession)

As per Sec 44AA - Prescribed books are required if in any one of the three years immediately preceding the previous year

if his income from business or profession exceeds 1,20,000 or

his total sales, turnover or gross receipts, in business or profession exceeds 10 lacs

Prescribed books are also required if the above limits exceeds during the first year of business/profession

3) Return filing is not at all compulsory if INCOME is less then the exemption limit Rs. 1,60,000

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Dr. Jones (Director) (253 Points)
Replied 05 March 2010

As far as maintaining books is concerned (Section 44AA), all he need to do is maintain all the Form 16A that he has and all the bank statements..right?

Any other thing he needs to do?

Amir (Learner) (4016 Points)
Replied 05 March 2010

Dear Dr. Jones,

Yes Sir, u r rite, if limit under Sec 44AA does not exceed then there is no need to maintain books n simply Form 16A, Bank statements, etc will do

But I would say preserve the bills/invoices of major expenses as well as capital assets

Dr. Jones (Director) (253 Points)
Replied 05 March 2010

Dear Amir,

Here the income exceeds Rs. 1.2 Lakhs (actual income around 1.27 lakhs) and that income is becuase of his contract employment only...so all he has is Form 16A and bank statements only....

Amir (Learner) (4016 Points)
Replied 05 March 2010

Dear Sir,

If he is not claiming any expenses then "Yes", only Form 16A & Bank statements will do....

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Dr. Jones (Director) (253 Points)
Replied 05 March 2010

Thanks Amir!

Dr. Jones (Director) (253 Points)
Replied 05 March 2010

Two more doubts though:

1. For applicablility of Section 44AA, it says 3 years preceding previous year: in that case does it include previous year?

2. For same section 44AA, is Balance sheet declaration compuslory in ITR-4?

Really appreciate your prompt replies!

Dr. Jones (Director) (253 Points)
Replied 05 March 2010

In Point 1, previous year means the Financial year for which we are filing our return.

Amir (Learner) (4016 Points)
Replied 05 March 2010

Dear Sir,

In Income tax, the term which is used in place of Financial year is "Previous Year", yes it is the year for which return is to be filed or the "year under consideration" as we can say.........

If u r checking for FY(Previous Year) 2009-2010, the u have look for FY 2008-09, 2007-08 & 2006-07

If Books are not required u/s 44AA then No need to give Balance sheet particulars in ITR

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