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Section 44ad fno

Aman Jindal - (1 Points)

03 June 2023

i have 30 lakh income in fno from 45 lakh turnover can i show 10 lakh as income under section 44 ad

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10 Replies

CA Aakarsh Jain (CA) (10216 Points)
Replied 03 June 2023

FnO is a normal business, and if we are showing it in 44AD, then we have an option to show 6% of the turnover as profit.
6% of 45lakh is 2.7 lakh. So you can show 2.7 lakh presumptive income irrespective of your actual income. This will also make your tax liability as Nil.
You can also show 10 lakh as your income, and there is no problem in that, but it will arise tax liability in your computation.
If you wanna know more about this topic and expore more options in this, then I'm leaving details in your inbox.

rama krishnan (12234 Points)
Replied 03 June 2023

If you are aware that you have earned income higher than 6% or 8%, then you are required to offer such sum as your total income in terms of section 44AD

44AD. [1] Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" :

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CA Aakarsh Jain (CA) (10216 Points)
Replied 03 June 2023

My friend Rama Krishnan,
You have misinterpreted section 44AD. The section itself says income on a presumptive basis. Also, the para you have shared, if you read it carefully, you will understand that it says we can show higher profit from 6% or 8% on our choice. It is not mandatory to show actual profit here if we want to show 8% or 6%.

rama krishnan (12234 Points)
Replied 03 June 2023

Thanks Mr. aakarsh... as per the provision above, if you are unable to presume the exact income, then you are required to offer minimum 6/8% and if you are able to presume that your income is greater than 6/8%, then such shall be deemed as income under presumptive basis. plz have a look on "shall" phrase used in the provision. hence it's not optional or choice of the assessee. this is my opinion and I stick to it

CA Aakarsh Jain (CA) (10216 Points)
Replied 03 June 2023

My friend Rama Krishnan, please also see previous line before reading "shall", that line says "sum higher than the aforesaid sum claimed to have been earned by the eligible assessee". It means if we doesn't claim to have a higher income then we don't need to show such higher income. And an assessee adopting these provisions is not required to maintain the regular books of account so there is no liability to proove anything. And if you see interpretation on this section on any senior CA or tax expert then you get to know everyone says the same. Please have a look again in detail read it together with other sections too. 🙂

rama krishnan (12234 Points)
Replied 03 June 2023

That's what I also meant... if the assessee is aware that he had earned a sum higher than 6/8% then such sum shall be deemed to be total income. as the query was made with respect to income earned from f & o, the profit earned would be definitely much higher than 6/8% and the expenses such as stt, commission, brokerage, misc charges etc won't be in higher side. further just because you are opting for 44ad it doesn't mean that assessee has nothing to prove. as per section 44AA, if the assessees total income exceeds 2.5 lakhs or gross receipts exceeds 25 lakhs, the assessee is required to maintain such books so as to enable the AO to assess true income

CA Aakarsh Jain (CA) (10216 Points)
Replied 03 June 2023

My friend 44AD overrides section 44AA

rama krishnan (12234 Points)
Replied 03 June 2023

44AD is special provision and 44AA is general provision. special provision never overrides general provision

CA Aakarsh Jain (CA) (10216 Points)
Replied 03 June 2023

But 44AD specifically says that if we are opting this provision books of account not require.

rama krishnan (12234 Points)
Replied 03 June 2023

Sir, none of the texts of section 44ad says so that there's no requirement to maintain books of accounts. sir, further, as you said 44ad overrides sections 30 to 43c and not section 44aa. it's always advisable to maintain such books to substantiate the claims made in roi