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Presumptive taxation

abhimanyu (no) (236 Points)

23 October 2017

An individual has a business loss but he wants to avoid tax audit and chooses to show 8% as profit of his business turnover. However, he cannot file ITR 4 since he has commission income also. Which form should he file to take advantage of presumptive taxation provisions?

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 23 October 2017

What is the nature of business? and turnover?

If within limit as per section 44AA & 44AB......... ITR 3 can be suitable; but section 44AD not applicable.......

abhimanyu (no) (236 Points)
Replied 23 October 2017

Nature of business is trading in derivatives and turnover is well below Rs. one crore

abhimanyu (no) (236 Points)
Replied 23 October 2017

Nature of business is trading in derivatives and turnover is well below Rs. one crore

abhimanyu (no) (236 Points)
Replied 23 October 2017

You have said Sir, "ITR 3 can be suitable; but section 44AD not applicable......." Can you please elaborate Sir?

RAJA P M ("Do the Right Thing...!!!") (127140 Points)
Replied 23 October 2017

Sec 44AD is not applicable for commission income...

abhimanyu (no) (236 Points)
Replied 23 October 2017

That is true that is why the query.

abhimanyu (no) (236 Points)
Replied 23 October 2017

Rambhia Sir, you have said, "ITR 3 can be suitable; but section 44AD not applicable......." Can you please elaborate Sir?

RAJA P M ("Do the Right Thing...!!!") (127140 Points)
Replied 23 October 2017

1----https:// tax guru.in/income-tax/itr4-sugam-applicable-ay-201718.

H T M L/

abhimanyu (no) (236 Points)
Replied 23 October 2017

Dear Raja ji, Kindly through light on my specific query.

RAJA P M ("Do the Right Thing...!!!") (127140 Points)
Replied 23 October 2017

Originally posted by : abhimanyu

An individual has a business loss but he wants to avoid tax audit and chooses to show 8% as profit of his business turnover. However, he cannot file ITR 4

You Can file ITR 4 (presumptive)

since he has commission income also.

You can't opt ITR 4 Commission Income

Which form should he file to take advantage of presumptive taxation provisions?

APPLICABILITY OF SECTION 44AD

1. Section 44AD applies to all businesses except the business of plying, hiring or leasing goods. Section 44AD won’t apply in case of plying, hiring or leasing of goods as these have already been covered under section 44AE.

2. Section 44AD wont apply in case of Agency Business as well as in case of a business earning income from Commission or Brokerage.

3. As Section 44AD specifically mentions the word business, therefore section cannot be applied in case of professionals.

4. Section 44AD only applies in case of Individuals, Partnership & HUF provided they are Resident in India. This section does not apply in case of Limited Liability Partnerships as they have been specifically excluded from this section.

If the taxpayer opts for filing his income tax return under this scheme, he can opt for disclosing his income tax return at any percentage above 6%/8% as the case may be. The assessee may choose not to opt for the scheme and may declare an income lower than 6%/8% of the gross receipts. However in such a case, the assessee shall have to keep and maintain books of accounts and get his accounts audited by a chartered accountant.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 23 October 2017

Yes, Mr. Raja P M is correct as presumptive assessment cannot be availed in case of commisssion income.

But here, there are two businessess. In the derivatives and option, the business is eligible for presumptive assessment.....

So, you can declare both the businesses in ITR 3 one with P&L & BS while second u/s. 44AD.... So simple.........

abhimanyu (no) (236 Points)
Replied 23 October 2017

Thanks Rambhia Ji. From your esteemed advice, it is gathered that ITR 3 can be used for taking advantage of presumptive taxation as per 44AD.for derivatives business. If that is so, further queries arise, 1. Where will presumptive income be shown in ITR 3 ? Are there any columns for this? 2. will such return in ITR 3 be treated under Presumptive scheme and the individual may have to File presumptive scheme for at least 5 years in continuation? Or Condition of 5 years will be applied only if ITR 4 is filed and not ITR 3

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 23 October 2017

1. Where will presumptive income be shown in ITR 3 ? Are there any columns for this?

Ans: Yes, there are different sections under P&L & BS tabs.

2. will such return in ITR 3 be treated under Presumptive scheme and the individual may have to File presumptive scheme for at least 5 years in continuation?

Ans: Assessment of business income can be under presemptive scheme, not ITR. . Not mandatory for declaration u/s. 44AD.

One cannot adopt it for next 5 years after discontinuation in any AY.
3. Condition of 5 years will be applied only if ITR 4 is filed and not ITR 3

Ans: The condition is not related to ITR 3 or 4.

abhimanyu (no) (236 Points)
Replied 23 October 2017

From your kind advice, the crux is that where ITR 4 cannot be filed, benefit of presumptive income can be taken by filing ITR 3. In this regard, 1. In your answer 2, the meaning of “ Not mandatory for declaration u/s. 44AD” is not understood by me. Kindly clarify. 2. it will be highly appreciated, if specific columns in P&L & BS tabs in ITR 3 for entering 8% profit are informed.