Presumptive Taxation- To reduce the burden of compliance for small taxpayers, The Government provides for a scheme called Presumptive Taxation Scheme. Under this scheme, the taxpayer is not required to maintain any books of accounts, and their profit is presumed to be a certain percentage of sales.
Presumptive taxation mainly covers the following 3 sections of the Income Tax Act.
Provided that all the above assessee should be Resident in India.
Who are the specified professional as per section 44AA
Following professionals are specified under section 44AA-
Other professionals, as mentioned below-
a. Movie artists include a producer, editor, actor, director, music director, art director, dance director, cameraman, singer, lyricist, story writer, screenplay or dialogue writer, and costume designers.
b. Authorized representative means a person who represents another person for a fee before a tribunal or any authority constituted under any law. It does not include an employee of the person so represented or a person who is carrying on the profession of accountancy.
Non-Applicability of section 44ADA of Income Tax Act
A partner of a professional firm gets interest and salary from the firm under section 40b. Such a partner can not opt for the presumptive taxation scheme under section 44ADA with respect to such salary and interest.
Under section 44ADA, The presumed income of the assessee is deemed to be 50% of the gross turnover for the financial year, however, the assessee can claim a higher profit.
However an assessee can claim profit lower than by 50% but in such case, he has to maintain books of accounts as mentioned u/s 44AA of the Act and get them audited as per section 44AB of the Income Tax Act.
Assessee opted for presumptive taxation u/s 44ADA will not be eligible to claim any type of deduction/expenses from section 30 to 38 (including unabsorbed depreciation.)
In the case of partnership firm, no interest and salary to partners subject to section 40b are deductible from such deemed profit.
Further, sections 40, 40A, and 43B are also not applicable if income is deemed under this section.
If there is any advance tax liability then the eligible assessee is required to pay 100% (in one installment) of its tax liability by 15th March of the financial year. No other provision of advance tax applicable on such assessee.
The assessee opts for section 44ADA, is not required to maintained books of accounts under section 44AA.
An assessee declaring his income as per presumptive taxation under section 44ADA of Income tax Act can also claim deduction under chapter VI-A.
WDV of depreciable assets
If the assessee opts section 44ADA then the WDV of any assets of eligible business shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of depreciation for each of relevant years.
Disclaimer: The information contained in the above article are solely for informational purpose after exercising due care. However, it does not constitute professional advice or a formal recommendation. The author does not own any responsibility for any loss or damage caused to any person, directly or indirectly, for any action taken on the basis of the above article.
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