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Presumptive taxation question

Sandeep (Self Employed) (125 Points)

19 May 2017

Would a Management Consultant be considered under section 44ADA as a Profession? If not, will they be considered as a Business under section 44AD? And if receipts are less than 1Cr declare income as 8% for tax purposes?

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9 Replies

PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.) (1443 Points)
Replied 19 May 2017

Do you have any business like Sole proprietorship, Partnership or ltd or you only provides services?

Sandeep (Self Employed) (125 Points)
Replied 19 May 2017

Sole Proprietorship with service tax registration.

CA PRADEEP C B (Prop: Pradeep C & Company Chartered Accountant Palakkad Kerala) (166 Points)
Replied 19 May 2017

Section 44ADA:
You are come under presumptive taxation under section 44ADA, as you are management consultant, a profession.
Tax liability :
if gross receipts are less than or equal to 50 Lakhs in a financial year, you can opt for this scheme and taxable income = 50% of gross receipts should be declared as income.
if gross receipts exceeds 50 Lakhs in a financial year , you are out of the scheme and tax audit under section 44AB will be applicable.

PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.) (1443 Points)
Replied 19 May 2017

If you have sole proprietorship consultant then your service is fall under Professional. In your case section 44ADA is applicable but if your total gross receipts is more than Rs. 50,00,000/- then you can't declare it as presumtive income. In that case you have to maintain books of Accounts and you will be liable for audit U/s 44AB.

CA PRADEEP C B (Prop: Pradeep C & Company Chartered Accountant Palakkad Kerala) (166 Points)
Replied 19 May 2017

Dear friends,
please note that under section 44ADA, the term used is total gross receipts, not turnover, as it is a profession. please use relevant terms.

Sandeep (Self Employed) (125 Points)
Replied 19 May 2017

As per 44ADA only legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration or any other occupation as notified by the CBDT as `profession'.

But Management Consultant is not a specified profession anywhere? So why it should not be treated as a Business?

PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.) (1443 Points)
Replied 19 May 2017

The person is fall under non specified profession.

Chitransh gupta (Student) (87 Points)
Replied 19 May 2017

I think professional list is given in 194j and same might be considered their

CA PRADEEP C B (Prop: Pradeep C & Company Chartered Accountant Palakkad Kerala) (166 Points)
Replied 19 May 2017

Please note that you are rentering professional services and whether your profession come under any of the professions notified by CBDT from time to time. specifically check the scope technical consultant within which your profession MAY be included. if it is not specifically mentioned anywhere you are out of the scheme. but you can never adopt 44AD as you are a professional. please note the rule " substance over form".
Based on that rule , you are really providing services not running business. so how can you classify yourself as a businessman.?

As per section 44AD:
eligible assessees = who is engaged in any business (except the business of plying, hiring or leasing goods carriages referred to in section 44AE), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (Rs. 1,00,00,000). Further, these provisions can be adopted by the assessees only if he has not claimed deduction under section 10A/10AA/10B/10BA or under sections 801111 to 80RRB in the relevant year.

Moreover, the provisions of section 44AD cannot be adopted by an assessees who is engaged in any profession as prescribed under section 44AA or is carrying on an agency business or is earning income in the nature of commission or brokerage.