July 19, 2024

44AD Section—Presumptive Income under Business – Explained by Ca Mukul Gupta

Ca Mukul Gupta Explains 44AD Section—Presumptive Income under Business

1. Applicability of section

a. Only applicable to individuals , partnership firm and HUF which means no other assessee is entitled to take benefits of section 44AD.

2. Non applicability of section -The section is not applicable to various sources of income like as follows

a. Income from Commission business

b. Income from Agency business

c. Income from Professional Business

d. Plying , hiring, goods transportation source of income Further, the section 44AD is also not applicable to LLP and body corporates assessees.

3. Minimum net profit — 6% or 8 % ?As per section, cash sales means any turnover whose payment has received or receivable in cash then the assessee need to show minimum 8% of cash turnover as net profit and pay income tax thereon.For e.g. If total cash sales is Rs. 10,00,000/- then net profit will be Rs. 60,000/- only and income tax on those 60,000/- only.

Similarly the minimum net profit to be considered 6% of total sales whose payment is received or receivable via any digital mode.

Further there is no bar of showing actual profit as per books of account if the assessee declares profit less than 6% or 8% then assessee need to get his account audited or if assessee declares more than 6% or 8% no issue at all.

4. Do not change on year to year basisNow once business income filed u/s 44Ad , the individual is restricted to file his succeeding income tax return for the next consecutive 5 year to 44Ad only and if he wishes to opt out then he has to get his accounts audited from a chartered accountant.

5. Not required to maintain books of accounts.

Although books of accounts are not necessarily to maintain for those assessee who are filing their income tax return u/s 44AD but while filing the income tax return assessee mandatorily need to declare the following balances as at 31st March of the filing year.

1. Sundry debtors,

2. Sundry creditors,

3. Cash balance and

4. closing stock

This is the summary of section 44AD as per our understanding.

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