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M. N. JHA (CA)     12 July 2011

Section 44AD ( Must read it once)

 

DUE TO MANY DOUBT ON SEC 44AD, I WILL TRY TO RESOLVE IT HERE..........MAY BE SOME HELPFULL FOR US

 

The salient features of the new presumptive taxation scheme are as under:

 

The scheme is applicable to individuals, HUFs and partnership firms excluding Limited liability partnership firms. It is also not be applicable to an assessee who is availing deductions under sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading “C.—Deductions in respect of certain incomes” in the relevant assessment year.( I M NOT ABLE TO UNDERSTAND IT FULLY, PLS ANYONE EXPLAIN IT)

The scheme is applicable for any business NOT ON  PROFESSION(excluding a business already covered under Sec. 44AE) which has a maximum gross turnover /gross receipts of 60 lakhs.

The presumptive rate of income is prescribed at 8% of gross turnover /gross receipts.

An assessee opting for the above scheme is exempted from payment of advance tax related to such business under the current provisions of the Income-tax Act.

An assessee opting for the above scheme is exempted from maintenance of books of accounts related to such business as required under section 44AA of the Income-tax Act.

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.( ISKA MATALAB HAI KI YADI USKI TOTAL INCOME TAXABLE LIMIT SE KAM HAI TO USKO AUDIT KARWAN JARURI NAHI HAOGA, PAR YE PARTNERSHIP KE CASE MAI NAHI HO SAKATA)

 

FOR EXAMPLES:

 TOTAL TURNOVER 25,00,000 IN CASE OF INDIVIDUAL, THEN 8% PROFIT COMES TO 2,00,000 BUT NOW IF

        PROFITS COME TO 180000, THEN AUDIT IS COMPULSORY

    &

     IF PROFITS COME TO140000 OR LOSS THEN AUDIT IS NOT COMPULSORY BECAUSE TOTAL INCOME IS LEES THEN MAXIMUM INCOME CHARGABLE TO TAX.

(ISE KAHATE INDIA KA INCOME TAX LAW ??????????)

 

Presumptive Income OR AUDIT ?????

 

Just pay avg 2667 a Month :So if a Individual is running a business and sale of the business suppose is 60Lakh(less than 60lakh as per above section) then is presumptive Income is  8 % of 60 Lakhs =4.80 lakhs .

Income Tax on  4.80 Lakh, as per Income tax slabs for 2010-11 Financial year is 10% of 320000(480000-160000)=32000.



Salary and Interest to partner allowed:After calculated  presumptive income @ 8 % of turnover in case of partnership firm ,salary and Interest to Partner under section 40b is also allowed .

Opt scheme or Obtain Audit report:

so Individual /Partnership Firms(other than LLP) may relax form Income tax worries by paying Avg2667 a month ,if  business turnover is less than 60 lakh.Further If person does not opt for this scheme he has to maintain books of account and has to obtain audit report on it.I think to maintain books of accounts and then got them audited From CA is more expensive than paying32000/- as Income Tax .

No Books of Accounts :To opt this scheme one should have to maintain the so much record so that Turnover of Business can be ascertained like sale bill etc .No need to maintain any cash book ,ledger etc etc.No need to maintain Balance sheet ,Profit and loss etc.Further keep one point in mind that this exemption is available under Income Tax Act only and if Book are required to be maintained under the provision of any other act than books of accounts has to be maintained under that act .

 

No Books/No Tax up to 2000000 of sales : as per section 44AA books of accounts is require to be prepared if turnover is more than 1,20000.But under this new,if your Business turnover is 20 Lakhs and you opt for this scheme than taxable income is calculated at 1.60 lakh (8 % 20 Lakh).and for individual, tax exemption  limit is also 1.60 lakhs (even higher for female/sr citizens ) .so person who opts this section 44AF is not required to pay any tax if Business turnover is upto 20 lakhs and also exempted to maintain books of Accounts.so persons upto Business turnover upto 2000000 must adopt this scheme.

 

Doubts on TDS provsion: Tds sections are applicable on Individual deductor under salary and on all section in case of partnership Firms .The above section has not extended the exemption of tds to person opted for this scheme which is very big drawback for this scheme .So I request to Govt to give exemption on Tds provision to  person ,who is opted this scheme.

 





Applicability – These amendments have been made applicable with effect from 1st April, 2011 and will accordingly apply in relation to assessment year 2011-12 and subsequent assessment years.

 

 

THANKS WITH RGDS

MR. JHA

(NOTE:- PLS CORRECT ME IF I M WRONG ANYWHERE)

 

 

SOURCE:- simpletax

 



 28 Replies

CA Ashwani Agarwal

CA Ashwani Agarwal (Practice)     12 July 2011

Very nice article. But 1 thing which i would like to add on is that you cannot run away from making Books of Accounts just because it is expensive. A person makes books not only for the purpose of income tax but for various other reasons. Otherwise how will you be able to know te value of debtors, creditors, stock, cash balance etc. So please dont think of declaring 8% profit only because it is less expensive. You will still have to maintain books of accounts.

M. N. JHA

M. N. JHA (CA)     12 July 2011

Originally posted by : CA Ashwani Agarwal

Very nice article. But 1 thing which i would like to add on is that you cannot run away from making Books of Accounts just because it is expensive. A person makes books not only for the purpose of income tax but for various other reasons. Otherwise how will you be able to know te value of debtors, creditors, stock, cash balance etc. So please dont think of declaring 8% profit only because it is less expensive. You will still have to maintain books of accounts.

RIGHTLY SAID SIR........WELCOME UR SUUGESTIONS

CA Ashwani Agarwal

CA Ashwani Agarwal (Practice)     12 July 2011

And you rightly said that it seems a little illogical that a person having Turnover of Rs. 60 lakhs should get his accounts audited if he shows NP of 160001, but if he shows NP of 159999 then he is not required.

 

It will be really appreciable if some can make us understand the logic behind this rule..

 

kamal kishor sen

kamal kishor sen (STUDENT Rajasthan)     12 July 2011

Very useful post 

thanks Mr. jha   :)

roameri

roameri (Self-Employed)     13 July 2011

TURNOVER UNDER SECTN. 44AD.
From A.Y. 11/12 the profit shall be estimated at 8% of TURNOVER where total TURNOVER or GROSS RECEIPTS do not exceed Rs.60 lakhs during a year.
Question.
Does TURNOVER or GROSS RECEIPTS to be construed as Sales or as Sales+VAT ?
Thanks,
Jamshed F. Mehta
 

Sunil Panwar

Sunil Panwar (Article Assistant)     13 July 2011

I have 1 query in regard of this section that where it is written that "Salary and Interest to partner allowed:After calculated  presumptive income @ 8 % of turnover in case of partnership firm ,salary and Interest to Partner under section 40b is also allowed"

Please refer source.

varun sahni

varun sahni (NA)     13 July 2011

useful article thanx a lot .....


(Guest)
Originally posted by : kamal kishor sen

Very useful post 

thanks Mr. jha   
CA Ashwani Agarwal

CA Ashwani Agarwal (Practice)     13 July 2011

Originally posted by : Sunil Panwar

I have 1 query in regard of this section that where it is written that "Salary and Interest to partner allowed:After calculated  presumptive income @ 8 % of turnover in case of partnership firm ,salary and Interest to Partner under section 40b is also allowed"

Please refer source.

The section says that it will be assumed that Expenses U/s 30 to 38 are assumed to be allowed while calculating 8% profit. So it obviously doesnt include section 40b. Therefor you can give deduction of section 40b.

 

Regards

CA Ashwani Agarwal

radhika rawat

radhika rawat (student)     13 July 2011

thanks for dis article

thakker jitendra

thakker jitendra (proprietor)     13 July 2011

Originally posted by : CA Ashwani Agarwal

Very nice article. But 1 thing which i would like to add on is that you cannot run away from making Books of Accounts just because it is expensive. A person makes books not only for the purpose of income tax but for various other reasons. Otherwise how will you be able to know te value of debtors, creditors, stock, cash balance etc. So please dont think of declaring 8% profit only because it is less expensive. You will still have to maintain books of accounts.

for above said things and also now a days small bussiness running on od / cc etc. from banks and finance co. they ask for profit & loss, balance sheet, debtor creditors list and so many things for running a good business one should maintain books of account however he is opting for 44ad.


(Guest)

frndz....i m goin through similar case of our client in my office. In that, client has opened FD/OD a/c in name of Proprietorship and FD interest for the same amounting Rs. 107000 approx. has been credited to P/L a/c. now, His turnover is just of Rs. 705000/- approx. and he has calculated his net profit of Rs. 113000/- including above interest.

Now, if we consider interest income in IFOS then according to section 44AD his presumptive income under B & P will be of Rs. 56400/- approx. (as higher of 44AD or Net Profit as per P/L a/c) and IFOS of Rs. 107000/- (net effect of 163400/-) whereas if we in toto consider the aggregate amount as B & P income then his total income will be of Rs. 113000/- only.

Moreover he is already in 30% tax slab rates...

wht 2 do nw.....wht the provisions exactly says abt

yogesh batra

yogesh batra (self employed )     14 July 2011

when loss from business then tax audit complusory...........

CA Dheeraj Bansal

CA Dheeraj Bansal (Chartered Accountant)     15 July 2011

the total income is after deduction of 80c or not.


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