Skip to main content

Section 44ADA of Income Tax Act- Presumptive Scheme for professionals

Before reading about section 44ADA of Income-tax Act, 1961 it is necessary to understand the presumptive taxation scheme of the Act.

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.

1) Section 44AD of Income Tax Act– Income presumed to be 8%/6% of the turnover.2

) Section 44ADA of Income Tax Act- Presumptive taxation @ 50% for Professionals.

3) Section 44AE of Income Tax Act- Presumptive taxation for transporters.

The following article explains in detail the provision of presumptive taxation for professionals under section 44ADA of The Income Tax Act, 1961.

Section 44ADA of Income Tax Act

W.E.F. FY 2016-17, a new Section 44ADA was introduced by the income tax law in order to ease the tax burden on professional taxpayers mentioned in section 44AA.

Applicability of section 44ADA of Income Tax

Eligible Business:- The provisions laid out in section 44ADA applicable to the specified professional such as legal, medical architect, accountancy, interior decorator, or any other professional as given in section 44AA.

Turnover:- The person whose gross turnover from the profession is below Rs. 50 lakhs can opt for the provision of section 44ADA.

Assessee:- Under section 44ADA Following assessee are eligible to opt this section provisions.

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-

  • Interior decorates
  • Technical consulting
  • Engineering
  • Accounting
  • Legal
  • Medical
  • Architecture
  • 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.

c. Any other notified professionals.

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.

Feature of section 44ADA of Income Tax Act

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 Information.

Comments

Post a Comment

Popular posts from this blog

Reasons and Rectification of Defective Return Notice U/S 139 (9)

Meaning :  Section 139 of the income tax Act, 1961 has provided the limit for every type of assessee who is required to file an income tax return. For filing of the return, every person should comply with the income tax act. Although if he made certain mistakes while filing the return then such return shall be deemed as defective return. In this article, we will discuss all those cases in which a return shall be called a defective return and how to deal with such a  defective return notice . A return shall be considered as a defective return unless it has contained all the following documents : Return in the Prescribed form:  Department has specified the income tax form as per the type of income and type of assesse. For example: if the person is having a salary income only then he is required to file ITR-1 if he has filed his return in any other form, then such return shall be considered as defective return.   Statement of computation of tax payable: ...
Post a Comment
Read more

TAN Application Online- Procedure of online TAN application

TAN refers to the Tax Deduction Account Number or Tax Collection Account Number. It is a 10 digit alphanumeric number. It can be applied online or offline, the procedure for the new application of TAN is different in both cases but the documentation is the same. In this post, we will discuss the procedure to make the TAN application online. TAN Application Online How to apply TAN online Applicants need to follow the below mention steps- Step 1-  Visit NSDL website or  click here  to visit. Step 2-  At the bottom go to apply for a new TAN and select from the dropdown ‘category of Deductors’ Step 3-  On doing so the applicant is redirected to Form 49B. Step 4-  Fill in the given form. Step 5-  Click Submit Step 6-  On Confirmation, the acknowledgment screen is displayed which contains the following 14-Digit acknowledgment number Name of the applicant Status of the applicant Contact details Payment Details Space for Signature Step 7- ...
Post a Comment
Read more

How To Get An Old Income Tax Refund?

As we all know if we had paid excess taxes than our income tax liability either by TDS/ TCS or in the form of Advance Tax, we can claim the refund of such excess tax paid by filing Income Tax Return u/s 139. The last date of filing of Income Tax Returns u/s 139(1) is July 31st of the relevant Assessment Year. However, Belated return can be filed under section 139(4) by the end of the relevant assessment year i.e. 31st March. So, if you want to claim a refund of the excess taxes paid, you must file your ITR maximum by 31st March to avoid the loss of your refund. But, there are many cases where the assessee missed this second deadline also and struggling to get their refund from the department. So, In this article, we will discuss in detail how you can get your old  Income Tax Refund  related to the previous year. Section 119(2)(b) of the Income Tax Act, 1961: Section 119(2)(b) confers the power to Central Board of Direct Taxes by which board if c...
Post a Comment
Read more