Section 44 AD Presumptive basis of Tax

1) Section will be applicable in case of business not profession. Business like earning commission, brokerage and Agency business are not eligible for claiming benefit of this section.

2) This section will be applicable in case where business turnover is upto RS 2Cr.

3) Once this scheme is adopted then it is assume to be adopted for the period of 5 years, however if it is left in between such option cannot be avail for the next 5 years.

4) Section 44AD is a presumptive basis of tax applicable in case of Individual, HUF, Partnership Firm (except LLP) , under this scheme tax payer is being given a benefit for not maintaining Complete books of accounts on just accepting a minimum tax rate of 8% of turnover . However assesse can maintain 6% rate when his total or gross turnover is in form of Account Payee cheque, Account Payee bank draft,through electronic clearing system through a bank account during the previous year or before the due date specified under Section 139(1).

5) The term ‘turnover’ refers to the total sales after deducting there from:-

  • a. Goods returned
  • b. Price adjustments,
  • c. Trade discount (not including discounts which are not part of invoice) and
  • d. Any other returns or cancellations

6) Turnover consider for determining taxable turnover must be exclusive of GST.

7) No further deduction corresponding to the section 30 to 38 will be available i.e. no further deduction of expenditures like salary, bill etc. will be available only deduction of interest

8) Latest Amendment in the section:-

  • a. Interest and Salary paid to partner as per partnership act is not allowed as expenditure liable for deduction under this section.
  • b. Entities claiming such benefit are liable to pay advance tax liability.

Note:- The same section will also be applicable for Profession however in such case turnover limit which is to consider will be RS 50 lakh p.a. and taxable profit to be shown must be 50% of the turnover limit.