Section 44AD

RAJA P M ("Do the Right Thing...!!!") (127177 Points)
Replied 16 July 2020

- Audit not applicable and it will be file with Books of Accounts as per sec 44AA...
- Sec 44ad not applicable as per Your query.

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Rajesh Kumar (ghf) (76 Points)
Replied 16 July 2020

Sir, 44ADA has specific provision which require audit only if Total income exceeds basic exemption limit. However 44AD lacks such explicit provisions except 44AD(4) for assesses opting out 44AD.... Plz share ur views on this.

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RAJA P M ("Do the Right Thing...!!!") (127177 Points)
Replied 16 July 2020

44ad and 44ADA can't avail if loss...

Rajesh Kumar (ghf) (76 Points)
Replied 16 July 2020

Thanks

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CA Payal Gupta (Chartered Accountant) (154 Points)
Replied 18 July 2020

Dear Rajesh,

In regards to your query, please refer the following explanation:

In the case of Business losses

Here, we have taken scenarios where a person has incurred losses in his business and wants to compute whether tax audit is applicable in their case or not, please check the explanation in the table below:

S. No.	Scenarios	Applicability of Tax Audit
1	Business loss Not opting in the presumptive scheme	Total Annual sales, turnover or gross receipts exceed Rs 1 crore
2	Business loss Not opting in the presumptive scheme Total income exceeds the basic threshold limit	Total Annual sales, turnover or gross receipts exceed Rs 1 crore
3	Business loss Opting in the presumptive scheme Total income below the basic threshold limit	Tax audit not applicable
4	Business loss Opting in the presumptive scheme Total income exceeds the basic threshold limit	Declares income to be Lower than profit or gain so deemed to be profit or gain under the relevant section. Tax Audit is applicable

According to your query, you fall under scenario 1 or 2, and hence, no Tax Audit is applicable in the given case.

In case of further queries, please do let us know.

RAJA P M ("Do the Right Thing...!!!") (127177 Points)
Replied 18 July 2020

If loss then can't be avail Presumptive scheme...

Rajesh Kumar (ghf) (76 Points)
Replied 18 July 2020

Raja Sir where in the 44AD it is mentioned that loss cases can't avail presumptive scheme? plz explain

RAJA P M ("Do the Right Thing...!!!") (127177 Points)
Replied 18 July 2020

Dear Mr Rajesh kumar.,

It's not mentioned directly in that sec. As per presumptive scheme taxpayers must be file with 8% / 6% profit...

CA Payal Gupta (Chartered Accountant) (154 Points)
Replied 18 July 2020

Dear Raja Sir,

Assumption: considering the situation of small businesses.

Suppose, I am filing my Income Tax Return in previous three years with opting Presumptive scheme, and to avoid preparing and reporting complete details of Profit or loss and balance sheet in the current year while filing ITR-3 (as I have incurred business loss in the current year) and I prefer to file voluntarily in the presumptive scheme and report my income from profit and gain from Business or Profession at 8% / 6% (as section 44AD says) even though the losses. So, in this case, I can still opt for a presumptive scheme and remain in the lock-in period of 5 years.

From the above, I can say that we can file u/s 44AD even though losses.

Please correct me If I am wrong here.

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Rajesh Kumar (ghf) (76 Points)
Replied 18 July 2020

Assesee falling in 44AD(4) i.e opts out presumptive scheme has to comply 44AA and compulsorily Audit accounts provided total income is above basic exemption limit.

RAJA P M ("Do the Right Thing...!!!") (127177 Points)
Replied 18 July 2020

Originally posted by : Payal Gupta

Well done Dear,

Assumption: considering the situation of small businesses.

- First of sec 44AD usable for small businesses turn over upto 2Cr. But, It's not have any special exemption if lesser turn over. Want to file with profit of required limit.

Suppose, I am filing my Income Tax Return in previous three years with opting Presumptive scheme, and to avoid preparing and reporting complete details of Profit or loss and balance sheet in the current year while filing ITR-3 (as I have incurred business loss in the current year) and I prefer to file voluntarily in the presumptive scheme and report my income from profit and gain from Business or Profession at 8% / 6% (as section 44AD says) even though the losses. So, in this case, I can still opt for a presumptive scheme and remain in the lock-in period of 5 years.

From the above, I can say that we can file u/s 44AD even though losses.

- No. In presumptive scheme Taxpayer will br shown Profit as per required limit

Please correct me If I am wrong here.

I can't understand this

( Suppose, I am filing my Income Tax Return in previous three years with opting Presumptive scheme, and to avoid preparing and reporting complete details of Profit or loss and balance sheet in the current year while filing ITR-3 (as I have incurred business loss in the current year) and I prefer to file voluntarily in the presumptive scheme and report my income from profit and gain from Business or Profession at 8% / 6% (as section 44AD says) even though the losses. So, in this case, I can still opt for a presumptive scheme and remain in the lock-in period of 5 years. )

As per my assumption of above quotes :-

- Tax payer without complete 5 years as above and will opt out then Audit applicable...

- Taxpayer file his return with profit (as per sec) three years and now he will file with loss (under - presumptive) then also applicable audit. Can't be file with loss

Please give Your view and elaborate above notes by You...

CA Payal Gupta (Chartered Accountant) (154 Points)
Replied 18 July 2020

Dear Raja Sir,

Please consider my views against your replies; pointwise:

- First of sec 44AD usable for small businesses turn over up to 2Cr. But It's not have any special exemption if lesser turn over. Want to file with profit of required limit.

Yes, Section 44AD is applicable to a person having turnover up to 2Crore, there is no doubt in it.

In my assumption, “considering the situation of small businesses”. Here, I am concerning with persons having business turnover which gives them negligible amount of tax.

Take an example (Disclaimer: just an example to create a circumstance):

Turnover: INR 31,26,000

Expenditure: INR 40,35,980

Business loss: INR 9,09,980

In this case, if I prefer to file Income Tax Return u/s 44AD and file ITR-4 and show

Net Profit: 8% of 31,26,000 = 2,50,080.

I think, in this case, Tax Audit is not applicable as I show profit in business instead of losses.

Taxpayer without complete 5 years as above and will opt out then Audit applicable...

Yes, Audit is applicable, but income should exceed basic exemption limit.

Taxpayer file his return with profit (as per sec) three years and now he will file with loss (under - presumptive) then also applicable audit. Can't be file with loss

For this, if I don’t show any losses in Income Tax Return and report income as per the limit 8% / 6%. Please refer my example given in first para.

I hope you understand the case.

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