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Section 44AD ( Must read it once)

Page no : 2
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.

AJAY BANSAL

AJAY BANSAL (CA)     15 July 2011

Dear Mr. Jha,

If assesse shows net profit below presumptive income of 8% then requred to maintain books and get audit of books.

But if total income is below taxable limit then assesse is not required to audit and maintain books.

The intention of the law here and meaning of "Total Income" is total income as per provisions of Sec.44AD i.e. on presumptive rate of 8%.

Thus for checking income below taxable limit, it is to check on the basis of presumptive income of 8%.

Law want to get releif from confusion that if net profit is below presumptive rate (whereas presumptive rate income itself is below taxable limit) no need to tax audit and maintain books. 

Thanks.

Rishab

Rishab (A.C.A.)     15 July 2011

A person has Turnover of Rs. 50,00,000/- and Net Profit thereon of Rs. 7,50,000/-.

Now is it fair for him to take advantage of this Section and show NP @ 8% of the turnover i.e. Rs. 4,00,000/-. & accordingly pay tax on it or it would be appropriate to show the NP at actual Rs. 7,50,000/- ?

 

I understand that this provision has been made to dissuade assesses from declaring a profit of less than 8%.This amendment should have exempted even those tax payers from maintaining books of accounts who declares his Net Profit more than 8% of the Turnover, as he is behaving in a responsible manner and naturally helping the government and paying more tax or atleast declaring his correct income.

 

But I think it is wrong to exempt persons from compulsory Audit who’s total Income does not exceeds the exemption limit.

This increases the complexity of the Income Tax Act and Why this amendment at stage when the Govt is in process to replace the entire Income Tax Act with Direct Tax Code.

M. N. JHA

M. N. JHA (CA)     15 July 2011

Originally posted by : Rishab
A person has Turnover of Rs. 50,00,000/- and Net Profit thereon of Rs. 7,50,000/-.
Now is it fair for him to take advantage of this Section and show NP @ 8% of the turnover i.e. Rs. 4,00,000/-. & accordingly pay tax on it or it would be appropriate to show the NP at actual Rs. 7,50,000/- ? (As per ethics this not fair to show profit of  4 lac instead of 7.50 lacs............ but question is this how many businesmen show profit more then 8% ??????? )

 
I understand that this provision has been made to dissuade assesses from declaring a profit of less than 8%.This amendment should have exempted even those tax payers from maintaining books of accounts who declares his Net Profit more than 8% of the Turnover, as he is behaving in a responsible manner and naturally helping the government and paying more tax or atleast declaring his correct income.
 
But I think it is wrong to exempt persons from compulsory Audit who’s total Income does not exceeds the exemption limit.( but many people who are salary or non salary person and running short business having turnover around 20 lacs and net profit around 125000 only........... then how u say this unfair ?????)
This increases the complexity of the Income Tax Act and Why this amendment at stage when the Govt is in process to replace the entire Income Tax Act with Direct Tax Code.



PREMKKUMAR

PREMKKUMAR (RETIRED)     16 July 2011

Read this article

/articles/critical-analysis-of-section-44ad-9048.asp

CA Bharat Aggarwal

CA Bharat Aggarwal (CA)     17 July 2011

View Provisions of New Section 44AD in Chart Format from the following link



https://tax-india.blogspot.com/2011/06/new-section-44ad-presumptive-income.html

CA. Dashrath Maheshwari

CA. Dashrath Maheshwari (TaXpert)     15 February 2012

Originally posted by : samkit shah

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

Interest income does not form part of Gross Receipt under section 44AD

Rajesh

Rajesh (chartered accountant)     30 May 2012

According to me no audit is required in case of individuals whose turnover is less than 60 lakhs and having profit less than 1.8 lakhs 

om varma

om varma (ipcc student)     25 June 2012

I have a question in this topic.

Let's assume that an individual has calculated his profit under normal procedure as Rs. 500000 but as per sec. 44AD his profit ( @ 8 percent) comes to Rs. 200000.

Now what profit will be transferred to Balance Sheet.

I know that profit can differ as per accounting and taxation.

But while filing the return debtors, creditors, stock and cash details have to be furnished so which cash balance will be furnished that which includes a profit of Rs 200000 or Rs 500000.

Please reply.

 

CA Garima

CA Garima (CA)     27 June 2012

Wonderful work done Mr. Jha..thanx a lot..yes

CA Ashwani Agarwal

CA Ashwani Agarwal (Practice)     27 June 2012

Originally posted by : om varma

I have a question in this topic.

Let's assume that an individual has calculated his profit under normal procedure as Rs. 500000 but as per sec. 44AD his profit ( @ 8 percent) comes to Rs. 200000.

Now what profit will be transferred to Balance Sheet.

I know that profit can differ as per accounting and taxation.

But while filing the return debtors, creditors, stock and cash details have to be furnished so which cash balance will be furnished that which includes a profit of Rs 200000 or Rs 500000.

Please reply.

 

Section 44AD says that income will be:

1. 8% of turnover

2. Actual profit.

 

Whichever is higher. In your case the profit will  be Rs. 500000 and not Rs. 200000.

viral bhagdev

viral bhagdev (student)     12 July 2012

Sir,

If a manufacturer, who doen't maintain stock record at all, So while conducting audit u/s 44AD what is to be shown in the audit report column for raw material consumed and finished goods ratio. Also, what notes have to be shown while specifying the reason for the same?


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