Section 44 AD of the Income Tax Act provides a presumptive taxation scheme for small taxpayers. Here are the conditions and features of Section 44 AD
- Turnover Limit: The scheme is available for individuals, Hindu Undivided Families (HUFs), and partnership firms with a turnover of up to Rs 2 crores (or Rs 5 crores from the assessment year 2021-22 onwards, subject to certain conditions related to digital transactions).
- Presumptive Income: Under this scheme, the taxpayer is allowed to presume their income at a minimum of 8% of the total turnover (6% in the case of digital receipts).
- Exemption from Maintaining Accounting Records: Taxpayers opting for the presumptive scheme are not required to maintain regular accounting records.
- Advance Tax Payment: Assesses opting for presumptive taxation have to pay 100% of the advance tax liability by 15th March of the relevant financial year.
- Exemption from Tax Audit: Taxpayers availing of the presumptive scheme are not required to get their accounting records audited.
- Simplified Tax Return: Taxpayers filing under the presumptive scheme can use a simplified tax return form, ITR-4.
It’s important to note the new condition added to Section 44AD regarding the continuity of the scheme for at least 5 years. If a taxpayer opts for the presumptive scheme but decides to show and file profits as per regular business (ITR-3) before the end of these 5 years, they will lose the benefits of presumptive taxation for the subsequent 5 years.
However, this 5-year condition applies only if the taxpayer declares profits lower than the prescribed rates (8% or 6%). If the taxpayer cannot opt for the presumptive scheme due to non-eligibility (e.g., turnover exceeding the limit), the 5-year restriction does not apply.
In cases where the taxpayer does not comply with Section 44AD(4) and their total income exceeds the basic exemption limit, they are liable to maintain books of accounts and may require a tax audit.
Please note that the information provided is based on the details you provided, and it’s always recommended to consult with a qualified tax professional or refer to the latest tax laws and regulations for accurate and up-to-date information.
Section 44AD of the Income Tax Act provides a presumptive taxation scheme for small taxpayers. Here are the conditions and features of Section 44AD:
- Turnover Limit: The scheme is available for individuals, Hindu Undivided Families (HUFs), and partnership firms with a turnover of up to Rs 2 crores (or Rs 5 crores from the assessment year 2021-22 onwards, subject to certain conditions related to digital transactions).
- Presumptive Income: Under this scheme, the taxpayer is allowed to presume their income at a minimum of 8% of the total turnover (6% in the case of digital receipts).
- Exemption from Maintaining Accounting Records: Taxpayers opting for the presumptive scheme are not required to maintain regular accounting records.
- Advance Tax Payment: Assesses opting for presumptive taxation have to pay 100% of the advance tax liability by 15th March of the relevant financial year.
- Exemption from Tax Audit: Taxpayers availing of the presumptive scheme are not required to get their accounting records audited.
- Simplified Tax Return: Taxpayers filing under the presumptive scheme can use a simplified tax return form, ITR-4.
It’s important to note the new condition added to Section 44AD regarding the continuity of the scheme for at least 5 years. If a taxpayer opts for the presumptive scheme but decides to show and file profits as per regular business (ITR-3) before the end of these 5 years, they will lose the benefits of presumptive taxation for the subsequent 5 years.
However, this 5-year condition applies only if the taxpayer declares profits lower than the prescribed rates (8% or 6%). If the taxpayer cannot opt for the presumptive scheme due to non-eligibility (e.g., turnover exceeding the limit), the 5-year restriction does not apply.
In cases where the taxpayer does not comply with Section 44AD(4) and their total income exceeds the basic exemption limit, they are liable to maintain books of accounts and may require a tax audit.
Please note that the information provided is based on the details you provided, and it’s always recommended to consult with a qualified tax professional or refer to the latest tax laws and regulations for accurate and up-to-date information.