Section 44ADA Presumptive Tax Scheme for Professionals August 31, 2017
Section 44ADA Presumptive Tax Scheme for Professionals
Meaning of presumptive taxation scheme
To
give relief to small professionals from lot of hassle of maintenance of BOOKS
of ACCOUNT and from getting the account audit, Income tax introduced the
presumptive taxation scheme us 44AD for SMALL professionals.
Various presumptive taxation schemes under
Income Tax Act
There
are three types of taxation schemes in Income Tax Act:
1)
Section 44AD – Presumptive taxation scheme for BUSINESS.
For
detailed provision please refer earlier article “Section 44AD PROFIT AND GAIN OF BUSINESS ON PRESUMPTIVE BASIS“.
2)
Section 44ADA – The presumptive taxation scheme for Professionals
3)
Section 44AE – The presumptive taxation scheme
For
detailed provision please refer earlier article “Section 44ADE Presumptive Tax Scheme for Small Business of Goods Carriage“
Why this section is proposed
This
section is proposed in line with the recommendation of Justice Easwar Committee
to achive following objective:
- Simplification
of taxation for professionals
- Bring
parity between SMALL BUSINESSMAN (who enjoy section 44AD) and SMALL
PROFESSIONALS
- Reduce
compliance burden of small professionals
Who is the eligible assessee
The
presumptive taxation scheme of section 44AD can be adopted by following
persons:
1)
Resident Individual
2) Resident Hindu Undivided Family
3) Resident Partnership Firm (not Limited Liability Partnership Firm)
In
other words, the scheme cannot be adopted by a non-resident.
Eligible Profession u/s 44ADA
Professionals
referred to in section 44AA (1) of the Income Tax Act whose gross receipts in total
from profession does not exceed Rs. 50 Lakhs in the relevant financial year.
1)
Legal
2) Medical
3) Engineering or architectural
4) Accountancy
5) Technical consultancy
6) Interior decoration
7) Any other profession as notified by CBDT
- Authorized representatives
- Film Artists
- Certain sports related persons
- Company Secretaries and
- Information technology
Payment of Advance Tax
A
person opting for the presumptive taxation scheme of section 44ADA is also
liable to pay advance tax.
Scheme of Computation of Income:
The
rate of computation of income on an estimated basis is 50% of turnover or gross
receipts of the eligible business for the previous year.
In
case of a person adopting the provisions of section 44ADA, income will be
computed on presumptive basis, i.e. @ 50% of the total gross receipts of the
profession.
However such person can declare income higher than 50%.
Provisions Relating to Maintenance of Books of
Account and Audit Requirement:
An
assessee adopting these provisions is not required to maintain the regular
books of account and he is also exempt from getting the books of account
audited.
- The
provision of section 44AA relating to MAINTENANCE OF BOOKS OF ACCOUNT will
not apply.
- Assessee
need not get the accounts audited u/s 44AB
Provisions Relating to Various Allowances /
Dis-allowances:
Income
computed as per section 44ADA will be net income for the business covered under
this scheme.
All deductions from sections 30 to 38 including depreciation and un-absorbed
depreciation / allowances shall be deemed as allowed year to year basis.
No dis-allowance can be made under sections 40, 40A and 43B.
Manner of Computation of WDV of Depreciable
assets:
The
WDV of any asset used in the business covered under section 44ADA shall be
calculated as if depreciation as per section 32 is claimed and allowed.
Declaration of Higher Income:
Declaring
income above the prescribed rate of 50%, the scheme permits the assessee to
declare at his option higher income.
Declaration of Lower Income:
If
the assessee wants to declares lower income then prescribed rate 50% and his
actual income exceeds the maximum amount which is not chargeable to tax, then
the relief from maintenance of books of account is not available and he is
required to maintain the books of account as per section 44AA and further, he
has to get such books of account audited as per section 44AB.