“Unlock insights into Section 44ADA of the Income Tax Act, 1961, governing presumptive taxation for certain professions. Learn about taxable profits, eligibility criteria, and the impact of Budget 2023 amendments. A comprehensive guide for professionals and businesses.”
Profits and Gains of certain professions on presumptive basis (Section 44ADA of the Income Tax Act, 1961)
Taxable Profits & Gains
50% of total gross receipts of an eligible assessee engaged in any eligible profession during the previous year will be considered as profits and gains from such profession.
Notes:
(1) Total gross receipts should not include indirect taxes for Sec. 44ADA Example:
| Taxable value of receipts | Rs. 1,00,000.00 ( Total gross receipts for Sec. 44ADA) |
| CGST | Rs. 9,000.00 |
| SGST | Rs. 9,000.00 |
| Rs. 1,18,000.00 |
(2) A person engaged in any eligible profession under this section and not declaring profit of minimum 50% of total gross receipts, has to keep and maintain books of accounts and other documents as specified in Section 44AA(1) and also get the accounts audited by a practicing Chartered Accountant and furnish the audit report as required u/s 44AB, provided total income of the assessee exceeds the maximum amount which is not chargeable to income tax.
(3) An eligible assessee may optionally declare taxable profit more than 50% of total gross receipts.
Who is eligible assessee?
A resident Individual and resident Partnership Firm (not an LLP) may declare profits & gains on presumptive basis u/s 44ADA, provided total gross receipts from the profession/s does not exceed fifty lakhs rupees during the relevant previous year
- LLP => Limited Liability Partnership Firm registered under the Limited Liability Partnership Act, 2008.
Change in Budget 2023 (effective from assessment year 2024-2025).
Where total gross receipts in a previous year is more than rupees 50 lakh but not more than 75 lakh, the following provision has been added in Budget, 2023: An assessee may declare income on presumptive basis u/s 44ADA, provided total gross receipts from the eligible professions does not exceed rupees 75 lakh and aggregate of amounts received in cash does not exceed 5% of total gross receipts during the relevant previous year.
Note: Receipt of an amount by a bearer cheque or a bearer bank draft shall be deemed to be receipt in cash.
- Where total gross receipts of an assessee does not exceed fifty lakh rupees during a previous year, he/it may declare profit on presumptive basis u/s 44ADA irrespective of the percentage of total gross receipts received in cash or/and through banking mode.
What is eligible Profession?
Professions referred to in Section 44AA(1) are eligible professions for Section 44ADA. Following professions have been referred to in Section 44AA(1):
Legal • Medical • Engineering Architectural Profession • Profession of Accountancy • Technical Consultancy • Interior Decoration • Authorized Representative Film Artist • Company Secretary • Information Technology.
“Film Artist” means any person engaged in his professional capacity in the production of a cinematograph film whether produced by him or by any other person, as-
(i) an actor;
(ii) a cameraman;
(iii) a director, including an assistant director;
(iv) a music director, including an assistant music director;
(v) an art director, including an assistant art director;
(vi) a dance director, including an assistant dance director;
(vii) an editor;
(viii) a singer;
(ix) a lyricist;
(x) a story writer;
(xi) a screen-play writer;
(xii) a dialogue writer; and
(xiii) a dress designer.
“Authorised Representative” means a person who represents any other person, on payment of any fee or remuneration before any Tribunal or authority constituted or appointed by or under any law for the time being in force, but does not include an employee of the person so represented or a person carrying on legal profession or a person carrying on the profession of accountancy;
Notes:
(i) A person engaged in any profession other than those referred to in Section 44AA(1) may declare profit on presumptive basis u/s 44AD.
(ii) No further deduction relating to business expenditure as referred to in Section 30 to 38 under the head profits and gains of business or profession shall be allowed and be deemed to have been already given full effect to.
(iii) The written down value of any asset of an eligible business shall be deemed to have been calculated as if the Assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years in which incomes were declared on presumptive basis u/s 44ADA.
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