Provisions for computing profits and gains on presumptive basis

Section 44AD (Provisions for computing profits and gains of business on presumptive basis)

Applicability

• The provisions of this section will only apply to resident Individual/ HUF/ Firm (except LLP) and is optional to all assessee.
• This section is applicable only if the turnover should not exceed Rs. 2crore
• In case assessee is not claiming deductions under section 10AA, 80IA to 80RRB then the profit and gains from the eligible business shall be deemed to be 8% of the total turnover or gross receipts.

Exception

This section is only applicable if the eligible assessee is not engaged in following businesses:

• Business covered under section 44AE.
• A person carrying on a specified profession under section 44AA.
• A person earning income in the nature of commission or brokerage.
• A person carrying on any agency business.

Amended provision

According to the financial amendment in year 2017, if turnover or receipts of the business during the Previous Year or before due date under section 139(1) has been made by account payee cheque or draft or ECS, then 6% on such receipts will declare as profit or assessee may declare more profit.

Section 44ADA (presumptive taxation scheme for assessee engaged in eligible professions)

Applicability

• The provisions of this section will only apply when the assessee is resident Individual/ HUF/ Firm (except LLP) and is optional to all assessee.
• This section is applicable when a resident assessee who is engaged in any profession referred under section 44AA
• whose total gross receipts does not exceed Rs 50 Lakh in previous year then a sum equal to 50% of total gross receipts shall be deemed to be income of PGBP.

Eligible professions

Eligible professions include legal, medical, engineering or architectural profession or profession of accountancy or technical consultancy or interior decorator.

What if assessee declares less profit

Assessee can declare his income lower than the estimated income. In such case he will have to:

• Maintain books of account and other documents as required under section 44AA.
• Get his accounts audited under section 44AB irrespective of amount of turnover or gross receipts.

Tax Rate

Assessee if fulfils the eligibility and applicability criteria can compute its income on presumptive basis at 50%. Assessee who computes its income under this section need not to maintain the book of accounts and not required to get it audited.

Section 44AE (business of plying, hiring or leasing goods Carriages)

Applicability

• This section is applicable for all categories of vehicles whether heavy, medium or lower.
• Provisions of section 44AE shall apply if the assessee does not have more than 10 goods carriage at any time during the previous year and who is engaged in plying, hiring or leasing such goods Carriage.
• If such transporter furnishes PAN to payer, then payer will not deduct TDS under section 194C irrespective of any amount. No other business expenditure will be allowed if assessee opted this section.

Computation of Income

The income for this purpose is Rs 7500 per month or part thereof for per vehicle.

Some other provisions

• No depreciation deduction will be allowed. However, depreciation will be calculated and deducted from the value of the asset under the balance sheet to determine the WDV of the block of an asset as per the provisions of Income Tax Act u/s 32.
• The income calculated under section 44AE is estimated and considered to be the net income of the assessee, and no deduction under income tax act will be granted.