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Section 44ad optional or mandatory

Jigna (Student CA IPC / IPCC) (55 Points)

18 September 2014

Pls let me know whether Section 44AD ( Presumtive Income) is Optional or Mandatory??

My client having turnover of 95,00,000/- & profit is Rs.4,75,000/- for FY 2013-14.It is Proprietorship fishing business.So he has to compulsarily file his return u/s 44AD or he can file Income Tax return as normally considering all deduction applicable to business?? & if section 44AD gets applicable then is he liable for Tax Audit because his profit is less then 8% of tunover. Pls give suggession as soon as possible.pls also let me know if any special provision applicable for fishing business.

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4 Replies

Abhijeet Deshpande (Co-Founder & Manager @ Tax-Yantra) (1171 Points)
Replied 18 September 2014

Sec 44AD is optional scheme. Assessee can opt for regular income tax provided, he maintains books of accounts under Sec 44AA and gets his books audited u/s 44AB, irrespective of turnover.

CA Dhanesh Jangid (CA) (105 Points)
Replied 18 September 2014

Section 44AD becomes applicable if you are showing profit below 8%, In such case you will have to get your books of accounts audited. If you so not want to get your books audited then show profit over 8%. And thwre is no special section for fishing business, In your case 44AD is mandatory.

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 11 March 2015

Section 44AD is optional scheme

As per Section 44AD (5)

Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.

So as per section 44AD(5) , if eligible person having turnover less than 1 crore but profit claims to be less than 8% ,then Tax audit u/s 44AB is mandatory.

Natesh (Audit Staff) (22 Points)
Replied 19 September 2018

Agreed Vishal Goel. Further, if income is less than basic exemption limit, then audit required. Right? Here, assume, Turnover is 95 lacs and profit is 1.90 lacs (i.e. less than exemption limit). Audit is not required.Right?