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Query regarding presumptive profits u/s 44ad

Indudhar (Tax Advocate) (427 Points)

02 September 2011

If the presumptive profit exceeds the taxable limit of Rs 160000/- whether sec 44AD is applicable

for eg for TO of Rs 50 lakh presumptive profit @ 8% is4 lakhs. can we declare the same4 lakhs income without any books of accounts?

please calrify me..

AND if an wholesaler/petty retailer having sales TO less than 60 lakhs & who has maintained books of accounts and his net income is below taxable limit (Rs 50,000/- to1,60,000/-), whether such accounts need too be audited?

Is there any exemption for non taxable assessess?

Please guide me fellas..

Thanks in anticipation.

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11 Replies

C.A SHASHANK GOYAL (Chartered Accountant) (362 Points)
Replied 02 September 2011

Hi, as per the provision of section 44ad , since the turnover does not exceed Rs 60,00,000 you are eligible for presumptive taxation and can pay tax at the rate of 8% . And also you need not to maintain books of accounts as section 44AA does apply when section 44ad applies .

Also when your income is less than that of 8% of turnover you need to maintain the books of accounts and get the tax audit done .

1 Like

Kanhaiya (Nangia & Co.) (1981 Points)
Replied 02 September 2011

Originally posted by : SHASHANK GOYAL
	Hi, as per the provision of section 44ad , since the turnover does not exceed60,00,000 you are eligible for presumptive taxation and can pay tax at the rate of 8% . And also you need not to maintain books of accounts as section 44AA does apply when section 44ad applies . Also when your income is less than that of 8% of turnover you need to maintain the books of accounts and get the tax audit done .

agree

1 Like

CA Krishna Chaitanya M (Chartered Accountant) (463 Points)
Replied 02 September 2011

as per sec 44 AD , if tournover not exceed 60 lacks, then he is eligible to show 8% income on tournover, and pay tax on that income( normal tax rates applicable), there is no special tax rates applicable for income shown as per sec 44AD.he is eligible to claim deductions other than income based deduction( 80IA , 80Ib.......etc

however if dealer is of the opinion that his income is below 8% of the tournover, then he must maintained books of accounts as per sec 44AA, and must get his accounts audited as per sec 44AB.

1 Like

Shah Tarun (Student) (800 Points)
Replied 02 September 2011

Agree with all. .For purpose of Sec 44AD,it's not relevant whether profit is below exemption limit or not.It just provides business income to be considered in return. .

Shah Tarun (Student) (800 Points)
Replied 02 September 2011

And keep it in mind that Sec 44AD is not applicable to company assesse. .

1 Like

CA Krishna Chaitanya M (Chartered Accountant) (463 Points)
Replied 02 September 2011

yes.sec 44AD applicable to individual , huf and firm

1 Like

Tehsinkhan Pathan (CA CMA DISA(ICAI) B.COM) (3956 Points)
Replied 02 September 2011

DEAR SIR, WITH RESPECT TO YOUR QUERY .......PLEASE READ FOLLOWING EXTRACT OF SEC-44AD WITH EXPLANATION.........

SECTION - 44AD(5) : READ AS FOLLOWS -

Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB

EXPLAINATION :-

The assessee is bound to get the books of accounts audited, if the following two conditions are satisfied:-

1. His profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) i.e. his net profit is lower than 8% of turnover.

and

2 Whose total income exceeds the maximum amount which is not chargeable to income-tax.

CONCLUSION :- Here see both the conditions are simultaneous and the assessee required to get his accounts audit only and only if his profits from the business u/s 44AD are lower than 8% of this turnover and further his total income is more than maximum amount which is not liable to tax.

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Rajagopalakrishnan R (PARTNER) (1417 Points)
Replied 02 September 2011

Mr Pathan is absolutely right

Shah Tarun (Student) (800 Points)
Replied 03 September 2011

@ Tehsinkhan Pathan : Yes you are right,good perspective. Thanks for correcting us. .

CA PRAVEEN SINGH (MANAGER ACCOUNTS) (2277 Points)
Replied 03 September 2011

An assessee with turnover below60 lakhs, who shows an income below the presumptive rate prescribed under these provisions, in case his total income exceeds the taxable limit, required to maintain books of accounts and also get them audited.

8% of gross receipts is treated as a profit & gain from such business.

1 Like