Section 44AD – Tax on Presumptive Basis – Complete Details

Section 44 ADVERTISEMENT– Tax on Presumptive Basis– Total Information. Section 44 ADVERTISEMENT– Earnings on Estimated Basis. Now you can scroll down below and check complete details relating to ” Area 44 AD– Tax on Presumptive Basis– Total Details”

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Area 44 AD– Tax on Presumptive Basis

To give relief to little assessees, the Income-tax Law has actually incorporated an easy plan known as Presumptive Tax Plan. There are two plans, as the plan of area 44 ADVERTISEMENT and the plan of section 44 AE. An assessee embracing these provisions is not needed to preserve the routine books of account and is likewise exempt from getting the books of account audited. In this post we will cover the provisions of the presumptive tax plan provided in section 44 ADVERTISEMENT.

Eligibility:

1) Person (Homeowner)

2) Hindu Undivided household (Local)

3) Collaboration company (Local) (LLP is not qualified)

4) any assessee who has actually claimed a reduction under areas 10 A, 10 AA, 10 B, 10 BA is not eligible for this.

5) Section 44 AD is not relevant in case of plying, working with or leasing of products as these are covered under section 44 AE.

Arrangement:

In case of an assessee who wants to choose these arrangements earnings will be computed on an estimated basis. The rate of calculation of earnings on an estimated basis is 8% of turnover or gross invoices of the eligible business for the previous year this is possible only if the overall turnover of the assessee is less than Rs. 1 Crore.

( This limit of Rs.

Deemed income– Deemed allowance:

1) If an assessee wants to select this presumptive taxation then he is not enabled to get reduction in regard of devaluation.

2) As soon as if you are selecting presumptive tax then your are deemed to be permitted reduction in regard of all costs under provisions of Area 30 to 38, and devaluation.

Allowance in regard of reimbursement and interest paid to partner in case of collaboration company:

Compensation and interest paid to partners is enabled as deduction from the earnings computed under this section. Such reduction shall be subject to limitations specified u/s 40( b).

Presumptive income:

8% of the total turnover or gross invoices of the assessee on account of such business or any higher amount voluntarily declared by the assessee shall be considered to be his earnings chargeable to tax.Provisions of Chapter XVII C. This section talks about advance tax.

In case of multiple organizations by an assessee:

If an assessees is bring more than one organization in a fiscal year then the income from all the businesses need to be taken in to factor to consider for computing the presumptive earnings u/s 44 ADVERTISEMENT.

Examples

Example

Mr. Soham is running an arrangement store. The turnover of the purchase the previous year 2012- 13 is Rs. 99,00,00 0. Can he embrace the arrangements of presumptive scheme of area 44 ADVERTISEMENT in respect of this company?

Response

The provisions of section 44 AD can be adopted by the qualified assessee who is taken part in any business (other than business of plying, hiring or renting of items carriages described in area 44 AE and except by the assessee who is engaged in any profession as prescribed under area 44 AA or is running firm business or is earning income in the nature of commission or brokerage).

Even more, turnover or gross invoices from such company should not surpass the limit of audit recommended under section 44 AB (i.e., Rs. Therefore, he satisfied both the criteria of the scheme and, hence, he can embrace the provisions of area 44 ADVERTISEMENT for his organization of provision shop.

Example

He wants to embrace the arrangements of section 44 ADVERTISEMENT in regard of this service. In this case what will be the income as per the arrangements of area 44 ADVERTISEMENT?

Response

As per the arrangements of section 44 ADVERTISEMENT, income will be computed on an estimated basis @ 8% of turnover or gross receipts of the eligible business for the previous year. 84,00,252 and, for this reason, his income as per the provisions of section 44 AD will come to Rs.

Example

SM Corporation, a partnership firm, participated in the business of cement manufacturing stated income according to the arrangements of area 44 ADVERTISEMENT during the previous year 2012-13 After calculating the earnings @ 8%, the partners of the company believed that in computing the WDV of the factory structure owned by them devaluation will not be deducted since no deduction on account of the very same was declared. Is the contention of partners correct?

Answer

As per the arrangements of area 44 ADVERTISEMENT, from the income calculated based on the arrangements of area 44 ADVERTISEMENT, more deduction on account of depreciation is not offered. The WDV of any possession used in the business covered under the plan of area 44 ADVERTISEMENT shall be computed as if depreciation as per area 32 is declared and enabled. Therefore, the contention of the partners is not fix. Even though no depreciation is declared by the firm, yet for purpose of calculation of the WDV of the asset, devaluation will be deducted from the worth of the block.

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