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presumptive taxation

rama krishnan (12234 Points)

27 May 2018

for example, if a professional, has gross receipts of RS. 4500000/-. after deducting allowable expenses, the net profit arrives at rs. 3000000/-. now under 44ada, what is the amount to be shown as his total income?

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19 Replies

Krishna (Manager - Genesis Tax Consultant) (531 Points)
Replied 27 May 2018

50% of gross receipts allowed for professional if his income is less than 50 Lakhs. Hence Show is net profit as 22, 50,000/-

rama krishnan (12234 Points)
Replied 27 May 2018

then what's the treatment about the balance amount i.e 7,50,000/-

Krishna (Manager - Genesis Tax Consultant) (531 Points)
Replied 27 May 2018

Sir If books not maintained you can consider based on my above reply, if you maintain books then you should by ITR3

rama krishnan (12234 Points)
Replied 27 May 2018

how a business man could not maintain books? then how could he maintain details of creditors debtors cash sales cash expenses etc

Krishna (Manager - Genesis Tax Consultant) (531 Points)
Replied 27 May 2018

Each every business man maintain the Accounts in single entry system, business men well know about their profits.

rama krishnan (12234 Points)
Replied 27 May 2018

I'm also asking about that only. when a business man determines his net profit as 30 LAKHS out of 45 lakhs gross receipts. then under 44ad, is he required to disclose 22.5 lakhs or 30 lakhs

Krishna (Manager - Genesis Tax Consultant) (531 Points)
Replied 27 May 2018

As per me I will go with 22.5 Lakhs, basis on gross receipts.

rama krishnan (12234 Points)
Replied 27 May 2018

then how will you account for the balance 7.5 lakhs

Krishna (Manager - Genesis Tax Consultant) (531 Points)
Replied 27 May 2018

As per Income Tax, if a person has not maintain the books of accounts basis on the total gross receipt consider 50% as net income for professional, on that basis I will do my computation.

If a person maintain books of Accounts properly then there is no need of presumptive taxation. He can file the return in ITR3 and pay the actual tax as per the Actual information.

rama krishnan (12234 Points)
Replied 27 May 2018

then how will you build up capital if you don't maintain books? just based on 50% presumptive income?

Krishna (Manager - Genesis Tax Consultant) (531 Points)
Replied 27 May 2018

Sir, It is purely depend upon the individuals who come for tax filing. Who ever comes, we ask them to maintain the books of accounts properly. If you are getting a new client and doesn't maintain the books of account at all. For him this we have to got also we need to educate him to maintain the books properly.

Presumptive Income is not the best solution for long term business....

rama krishnan (12234 Points)
Replied 27 May 2018

just for the sake of academic interests only I'm asking... in my opinion, if you declare 22.5 lakhs under 44ad, then 7.5 lakhs will form part of concealed income

Krishna (Manager - Genesis Tax Consultant) (531 Points)
Replied 27 May 2018

I totally agree and not denying with your point, but a new client who comes and ask for filing the returns but he doesn't maintain any accounts and he doesn't have any bills. How we can proceed for him? Law is permitting to take total gross receipt of the business, if that is the case Income tax law should be change and it has to be very stringent on business people who does not maintaining books of accounts. Then everything will change, many people will get opportunity.

Krishna (Manager - Genesis Tax Consultant) (531 Points)
Replied 27 May 2018

Sir, I totally understand where you want to end up the discussion:-)

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