ITR 4 section 44AD

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Shankar Mazumder

25 Points Joined October 2017

Dear Sir,

Suppose one files ITR 4 for income tax filing and presents 8% as profit on which the income tax is paid. Let me take an example of the total income being Rs 20 Lakhs for a financial year, so the 8% of 20 Lakhs is Rs 1.6 Lakhs which is well within the income tax slab and no tax have to be paid.

But my question is that is this LEGAL? As this is completely based on the premise that 92% is expense which may not be the actual case. In actual sense the person may have an expense of only 20-25%...but taking advantage of ITR4...

So my question is ITR4 section 44AD not resulting in unaccounted money? or is it legal?

Regards,

Replies (2)

Kapadia Pravin

17264 Points Joined December 2018

The section 44AD says that you have to show minimum 8% profit on turnover or Gross receipts or actual profit , whichever is HIGHER

(6% in case receipts or turnover is by way of cheque or digital mode)

it's as per income tax Act and not illegal

Suresh Thiyagarajan

Student

3986 Points Joined July 2018

1. There is nothing wrong in what was formulated as law. If the question is relating to the purpose of law where people would exploit it by showing profit @ 8% instead of actual profit which could be higher.
2. Presumptive taxation u/s 44AD or sec 44ADA or sec 44AE is introduced not to burden small taxpayers with the maintenance of books of accounts and carrying out an audit. There may be cases where their actual profit could be higher than 8% of the T.O but that should not make a difference as he is a small player and Income tax is giving him an added benefit for running a small business. Increasing this % will result in people not opting for presumptive taxation and they need to go regular return which will be maintaining books of accounts. That ultimately will increase the cost to the assessee.
3. Once it's been set as law it will not be illegal and it is a fair advantage to small taxpayers to show their profit @ 8% on their T.O and reduce compliance burden.
Please correct me if the above explanation was not clear.