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Section 44ad for online software selling

MuthuKrishnan (Manager) (18 Points)

29 November 2017

Hi,

1. I am running a partnership firm with a partner and with 5 employees. We are creating softwares using employees and selling the products on our website. This year we have to pay the taxes. Our turnover so far is around 10 lakhs. Whether this is business and we can opt for Section 44AD or profession?. Kindly clarify if anybody. Our customers will buy the products from our website using a signup form/order form.

2. And i am also running an online ecommerce store selling physical products. Whether this business can be considered to have benefit for Section 44AD?

I have searched entire internet and i dont have clear answer even from CAs.

Regards

Muthu

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3 Replies

Luvish Jain (Tax Consultant) (507 Points)
Replied 29 November 2017

you can go for sec 44AD no issues in ur present scenario as above.

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Sarath Rajendran (Nil) (2791 Points)
Replied 29 November 2017

1. Yes, As per the provisions of section 44AD, from the net income computed at the prescribed rate, i.e., @ 8%, an assessee is not permitted to claim any deduction under sections 30 to 38 (including depreciation or unabsorbed depreciation) from such income. However, in case of an assessee, being a partnership firm, further deduction on account of remuneration and interest paid to its partners within the limit specified under section 40(b) is allowed. Thus, in this case the firm can claim further deduction on account of remuneration and interest paid to its partners within the limit specified under section 40(b). section 40 (b) deals with limits of remunaration and interest payment.

MuthuKrishnan (Manager) (18 Points)
Replied 29 November 2017

Thank you for quick response Luvish Jain and sarath,

But some assessee's have been telling when submitting ITR4 form with a business code "Software Development Agency", the submission was rejected with "defective return". Thats y we are confused.,

see reference: https://www.taxfull.com/5906/received-a-notice-under-section-139-9-for-defective-returns

All computer related businesses are listed under "Service Sector" in business codes listed by income tax department.

Regards

Muthu