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June 11, 2020

How to file Income Tax Returns without Book of account for Business and Professionals?

by Mahesh Mara in Income Tax

How to file Income Tax Returns without Book of account for Business and Professionals in Presumptive Taxation?

Person engaged in business or profession is required to maintain books of accounts as per section 44AA. Provision 44AA states that if person is engaged in business and the net profit from business is more than Rs. 1,20,000 or the total sales is more than Rs. 10,00,000 in any of the preceding 3 years then he is required to maintain books of account and in case of person is engaged in profession and if the gross receipt is more than Rs. 1,50,000 in all 3 previous years then he is required to maintain books of account. In order to give relief to small taxpayers from the various compliance 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. Under presumptive scheme the person is required to show only a percentage of turnover or gross receipts as net profit earned under the heads business and profession and need not required to give detail like Profit and loss and balancesheet of the business. In this article you will learn about various provisions of the presumptive taxation scheme.

How to file Income Tax Returns without Book of account for Business and Professionals in Presumptive Taxation?
How to file Income Tax Returns without Book of account for Business and Professionals in Presumptive Taxation?

A. Section 44AD: Profit and Gains of Business on Presumptive Basis

The presumptive taxation scheme u/s 44AD is designed to give relief to small taxpayers who is engaged in any business except the business of plying, hiring or leasing of goods carriages referred to in section 44AE and Profession referred in section 44ADA. If person is opting for presumptive taxation scheme and declares income as per section 44AD then he is not eligible to maintain books of accounts as per section 44AA. Person having turnover up to Rs. 2 crore can opt for presumptive taxation scheme under section 44AD. The other points of section 44AD is covered as under:

Who are the eligible assesse under section 44AD?

The following persons are eligible for opting presumptive taxation scheme:

  1. Resident individual or resident HUF or Resident firm excluding LLP who has not claimed deduction under section 10AA or 80IA or 80RRB.
  2. Person having turnover in the previous year up to Rs. 2 crore can opt for section 44AD.
  3. This section is applicable to person engaged in business except:
  4. Person engaged in business of plying, hiring or leasing of goods carriages referred to in section 44AE
  5. Person engaged in agency business
  6. Person engaged in commission and Brokerage business.

In other words, the scheme cannot be adopted by a non-resident and by any person other than an individual, a HUF or a partnership firm (not Limited Liability Partnership Firm).

How to calculate presumptive income u/s 44AD?

Presumptive taxation income u/s 44AD= Turnover X 8%/ 6%

Note:

  • If turnover realized by account payee cheque/ DD/ electronic payment through bank account or any other electronic mode as may be prescribed upto due date of return filing then presumptive income shall be 6% of the turnover
  • If turnover realized by cash then presumptive income shall be 8% of the turnover

B. Section 44ADA: Profit and Gains of Profession on Presumptive Basis

The presumptive taxation scheme u/s 44ADA is introduced to provide relief to small taxpayers who is engaged in profession referred in section 44AA except the business of plying, hiring or leasing of goods carriages referred to in section 44AE and Profession referred in section 44ADA. If person is opting for presumptive taxation scheme and declares income as per section 44ADA then he is not eligible to maintain books of accounts as per section 44AA. Person having gross receipts up to Rs. 50 lakhs can opt for presumptive taxation scheme under section 44ADA. The other points of section 44AD is covered as under:

Who are the eligible assesse under section 44ADA?

As per section 44ADA resident assesse engaged in profession as referred in section 44AA are eligible for opting presumptive taxation scheme u/s 44ADA. As per section 44AA professions include the following:

  1. Medical practitioner
  2. Legal practitioner
  3. Person engaged in Accounting service
  4. Film artist
  5. Engineering
  6. Technical consultancy
  7. Architectural
  8. Interior decorator
  9. Company secretary
  10. Any other profession as may be notified by CBDT

How to calculate presumptive income u/s 44ADA?

Presumptive taxation income u/s 44AD= Turnover X 50%

C. Other Important point’s u/s 44AD and 44ADA:

  1. Person opting for presumptive taxation scheme is required to pay advance tax. However, there will be only one installment i.e. 15th March of Financial Year.
  2. Where Person opting for 44AD or 44ADA then deduction of expenditure u/s 30 to 38 shall not be allowed.
  3. In case of partnership firm partner’s remuneration, salary, interest etc. as per section 40(b) shall not be deductible while computing income under section 44AD or 44ADA.
  4. If person is opting for presumptive taxation scheme and declares income as per section 44AD or 44ADA and turnover is up to Rs. 2 Crore in case of business or Gross receipt is more than Rs. 50 lakhs in case of profession then assesse is not required to maintain books of account and get it audited.
  5. If assesse declares income for any previous year as per 44AD or 44ADA and he doesn’t declare income as per 44AD or 44ADA in any of the 5 consecutive previous year then he shall not eligible to claim benefit of section 44AD or 44ADA for 5 years subsequent to the year in which assesse not declare income as per section 44AD.
  6. Where the assesse declares income less than 6%  or 8% of turnover in case section 44AD or declares income less than 50% of Gross receipts in case section 44ADA and the net total income is more than basic exemption than the assesse is required to maintain books of accounts and get it audited.

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