Presumptive Taxation Scheme of Section 44ADA
To give relief to small taxpayers from the tedious job of maintenance of books of account and from getting the accounts audited, the Income-tax Act has framed the presumptive taxation scheme under sections 44AD, section 44ADA and section 44AE. In this part we will discuss about various provisions of the presumptive taxation scheme of section 44ADA.
As per the Income-tax Act, a person engaged in business or profession is required to maintain regular books of account and further, he has to get his accounts audited. To give relief to small taxpayers from this tedious work, the Income-tax Act has framed the presumptive taxation scheme under sections 44ADA.
A person adopting the presumptive taxation scheme can declare income at a prescribed rate and in turn, is relieved from tedious job of maintenance of books of account and also from getting the accounts audited.
The presumptive taxation scheme of section 44ADA can be opted by the eligible persons, if the total value of services provided do not exceed Rs. 50,00,000 p.a.
For whom the presumptive taxation scheme of section 44ADA is designed?
The presumptive taxation scheme of section 44ADA is designed to give relief to small taxpayers engaged in specified profession.
Eligible persons who can take advantage of the presumptive taxation scheme of section 44ADA
A person resident in India engaged in following professions can take advantage of presumptive taxation scheme of section 44ADA:-
1) Legal
2) Medical
3) Engineering or architectural
4) Accountancy
5) Technical consultancy
6) Interior decoration
7) Any other profession as notified by CBDT
Manner of computation of taxable income in case of a person adopting the presumptive taxation scheme of section 44ADA
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%.
The presumptive income computed @ 50% is the final income and no further expenses will be allowed
A person who adopts the presumptive taxation scheme is deemed to have claimed all deduction of expenses. Any further claim of deduction is not allowed after declaring profit @ 50%.
While computing income as per the provisions of section 44ADA, separate deduction on account of depreciation is not available. However, the written down value of any asset used in such business shall be calculated as if depreciation as per section 32 is claimed and has been actually allowed.
Payment of advance tax in respect of income from professions covered under section 44ADA
Any person opting for the presumptive taxation scheme under section 44ADA is liable to pay whole amount of advance tax on or before 15th March of the previous year. If he fails to pay the advance tax by 15th March of previous year, he shall be liable to pay interest as per section 234C.
Provisions to be applied if a person does not opt for the presumptive taxation scheme of section 44ADA and declares his income from profession at lower rate (i.e. less than 50%)
A person can declare income at lower rate (i.e. less than 50%), however, if he does so, and his income exceeds the maximum amount which is not chargeable to tax, then he is required to maintain the books of account as per the provisions of section 44AA and has to get his accounts audited as per section 44AB.
