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Sec 44ad real v deemed income

Rahim (Business) (37 Points)

23 December 2016  

Hello

 

I need clarification rrgarding real and deemed income as per Sec 44AD of IT Act.

 

Since no books of accounts need to be maintained if turnover is Rs 2 Crore or less and 8% is deemed as income and tax is paid accordingly, i need clarification with the below mentioned points:

 

1) How will books of account be maintained if real income is, say 20% can the assessee only pay taxes on deemed income 8%?

 

2) Since no books of accounts needs to be maintained how is real income shown in the books wiz the deemed income? Will the accounts be maintained taking 8% income or real income 20%?

 

Example:

Sales - Rs 1.5 Crores

Real Income - Rs 30 lakhs

Deemed Income u/s Sec 44AD - 8% of Rs 1.5 Crores = Rs 12 Lakhs.

Tax on Deemed Income if Assessee is a Firm - 30.9% of Rs 12 Lakhs = Rs 3.7 Lakhs

So what will be the distribtabe profits for partners if Presumptive Taxation is followed?

Regards


 3 Replies

Shubham Gupta (Business Consultants) (2077 Points)
Replied 23 December 2016

hello 
 

first of all U/s Sec 44 AD maintenance of books is required when two conditions are satisfied:-

  1. Claim lower profit than limit specified u/s 44AD
  2. Total Income exceed basic exemption limit.

So your case comes in point 2.

for partnership firm, section 44ADA is for presumptive taxation

and profit will be distributed after reducing presumptive tax from gross profit

www.mytaxfiling.in

info @ mytaxfiling.in 

Koushik D C (Proprietor/Freelancer) (938 Points)
Replied 23 December 2016

Computation of income under the normal provisions of income tax = Turnover or gross receipts – allowable expenses

Under presumptive basis u/s 44AD, income = Turnover * 8%, [however taxpayer can declare higher income]

Now answer to your question:

  1. So long as you are declaring the income @ 8% u/s 44AD, no need to maintain the books..!

      2.  If you are declaring income @ 8% it does not mean that your actual profit is 8% because it is a presumptive based taxation. Maintain the books as per actuals..!

Rahim (Businessperson) (460 Points)
Replied 25 December 2016

Thank you everyone.

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