I want to switch to ITR-4S under section 44AD. I am running an eligible business, no doubt on that. In the past years, my profit ratio has been well above 6% of the gross receipts, even upto 40% in some years, but it's very inconsistent. All my receipts are digital so I am eligible for presumptive income @ 6%.
Assuming my turnover is 1 Crore, my presumptive income would be Rs. 6 lakhs. After availing the deduction u/s 80C, my taxable income will be Rs. 4.5 lakhs. I will pay the applicable tax on this.
I don't even know the actual profit since I don't maintain books, as relaxed by this provision.
Now, my question is whether only Rs. 6 lakhs will be considered as my addition to the capital and any excess amount (out of the recorded digital turnover) found in my bank/investment will be considered as undisclosed income (liable for penalty etc.).
If so, what is the main benefit of section 44AD? Is it just freedom from bookkeeping for the eligible assesses, or should it be considered as a discounted slab in income tax, and any amount within the digital turnover could be considered as capital?
CAclubindia
