Highlights of Section 44(AD), Presumptive Tax:
Taxable limits for Section 44(AD) for FY 2023-24, 2024-25 is 3 Crores.
A new condition has been introduced wherein a minimum of 5 years to be continued for Presumptive Tax benefits under Section 44(AD). If in the event, you switch over to regular business, the Presumptive benefits will be disallowed for a period of 5 years from the year of switching to normal tax filing.
- 6% net income on digital receipts.
- 8% on cash receipts.
- Did not maintain accounting records.
- No need to pay advance tax.
- No need of Audit of books of accounts.
ITR-4 can be filed instead of ITR-3. If Gross revenue above prescribed limit then taxable under sec 44(AD). If the Individual/HUF/Partnership/Firm has multiple businesses, gross receipts should be clubbed.
- Section 44(AD) is applicable to Individuals/Proprietorship/HUF & Partnership.
- Business of Transportation, Hiring, Liaisoning of Goods, Garages cannot adopt this provision as referred in Sec 44(AE).
How is computation of Section 44(AD) done?
Say for eg: Gross receipts of Rs. 70 lakhs comprising of Digital receipts of Rs. 60 lakhs & Cash receipts of Rs.10 lakhs.
Proprietorship – Income 4, 40,000 – Tax = 0
Ineligible Businesses’:
- Claims deductions under Sec 10A/Sec 10AA/Sec10B/Sec10 BA for Pertinent FY
- Ineligible also under section 80HH to Sec 80 RRB for Pertinent FY
- Agency business
- Commission / Brokerage
- Professionals.
- Insurance Agents
Depreciations are not available.
Presumptive Sec under 44 ADA.
This scheme is designed to give relief to small tax payers carrying on professions that are covered under the presumptive taxation under Sec 44 ADA, namely:
- Legal
- Medical
- Engineering
- Architecture
- Accountancy
- Technical
- Consultancy
- Interior Decorations
- Other Professions notified by CBDT.
The buyers of Individual, Presumptive Partnerships are eligible. The Gross receipts should not exceed 75 lakhs per annum.
50% OF THE Gross receipts is considered for tax computation; however, income can be declared more than 50% also. Maintenance of books is not mandatory.
Tax Audit is not applicable.
Depreciation not available.
Computation of Tax:
Say for eg, a doctor has a gross receipts of 60 lakhs which are completely digital receipts. Taxable income will be 30 lakhs & tax will be after deducting 80C, 80D & Other eligible receipts & exemptions.
Tax will be computed accordingly on the Individual Slab basic.
Presumptive Taxation Scheme under Sec 44 AE:
This is relief to small tax payers in the business of Plying, Hiring or Leasing of Goods Carriages, Individual, Proprietorship, HUF, Firm, Company all are eligible.
The condition is that the business should not own more than 10 vehicles at any time during the year.
Business with more than 10 goods vehicle are not eligible for this exemption.
Computation of Presumptive taxation under Sec44 AE.
Say for eg a Heavy Goods Vehicle with Income @ Rs1000/- per ton of gross vehicle weight for every month or a part of month during which the heavy goods vehicle is owned by the tax payers. Other than the heavy vehicle goods rate of Rs.7500/- per month shall be adopted or part of the month to be considered as full month for the part of computable taxation for eg. Heavy Vehicle carrying 13 tons @ Rs.1000/- per month, Number of vehicles – 5, Monthly income will be Rs.65000/- x 12 months will be Rs.780000/- as per Sec 44 AE.
Let us assume income other than heavy vehicles, 4 vehicles monthly income will be Rs.30000/-, for 12 months Rs.3600000/- as per Sec 44 AE. No need to maintain books of Accounts. Advance Tax will be applicable. Person opting to pay less than the prescribed rate of Sec 44 AE can do so by maintaining books of accounts and get the books audited.