Suggestions on Section 44AB as proposed to be amended by Finance Bill 2017- Increased threshold for presumptive tax cases under section 44AD – Consequential amendments required in section 194A/ 194H/ 194I & 194J

The Finance Bill, 2017 proposes to amend the section 44AB to exclude the eligible person, who declares profits for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, total turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year, from requirement of audit of books of accounts under section 44AB. The said change is proposed by insertion of a proviso to section 44AB.

It is a welcome amendment. However, consequential amendments are required in sections 194A/ 194H/ 1941/ 194J wherein an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such interest is credited or paid, is liable to deduct income-tax under the respective section(s).

In other words, no consequential amendment has been proposed in sections 194A/ 194H/ 1941/ 194J wherein an individual/HUF is required to deduct tax at source if his/its turnover is exceeding limits specified clause (a) and (b) of section 44AB. The monetary limit as specified under clause (a) is still 1 crore which means that a person is required to deduct tax under the aforesaid sections despite the fact that he has opted for presumptive taxation under section 44AD and his turnover is less than Rs.2 crores, due to which he is not liable to tax audit under section 44AB.

Suggestion:

It is suggested that in line with the enhanced limit proposed in section 44AB for a person opting for presumptive taxation under section 44AD, consequential amendment may be made in sections 194A/ 194H/ 194I/ 194J by including reference to the newly inserted proviso to section 44AB.

Source- ICAI Post-Budget Memoranda-2017

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Tags : Budget (1925) Budget 2017 (355) ICAI (2498) Section 194A (23) section 194H (46) section 194I (46) section 194J (60) section 44AB (132) Section 44AD (116) TDS (953)

6 responses to “Budget 2017: Increase 2 crore Turnover limit for section 194A/ 194H/ 194I & 194J”

  1. Manoj Kumar says:

    Dear Sir/Madam,
    I am hired as consultant and paid payment under sec 194J with 10% TDS. As the total payment in last 10months is higher than Rs. 10lakh, do I need to avail Service Tax no? Should I pay Service Tax on total income less expenses?
    Or I need to pay income tax as per respective income tax slab showing income from others?

    I tried to find out answer from your website but could get clear picture.

    Also note that I will be paid under salaries from Feb 17. So contract as consultant is come to end in Jan 17.

    Pl clarify.

  2. Arvind Kumar says:

    How to compute home loan interest benefits using section 80ee and 24b in financial year 2016-17?

  3. Amit says:

    Sir, in this regard Dept. has issued a press release dated 20.06.2016 stating therein :

    “Section 44AB of the Income-tax Act (‘the Act’) makes it obligatory for every person carrying on business to get his accounts of any previous year audited if his total sales, turnover or gross receipts exceed one crore rupees. However, if an eligible person opts for presumptive taxation scheme as per section 44AD(1) of the Act, he shall not be required to get his accounts audited if the total turnover or gross receipts of the relevant previous year does not exceed two crore rupees. The higher threshold for non-audit of accounts has been given only to assessees opting for presumptive taxation scheme under section 44AD.”

    Please reply.
    .

  4. MAHESH says:

    sir
    I WANT TO DRAW ATTENTION ON 44AD FOR PARTNERSHIP FIRM IN WHICH IT IS PROVIDED THAT INTEREST ON CAPITAL AND REMUNARATION TO PARTNERS WILL NOT BE ALLOWED SO IF SECTION 44AD OPTED THAN THERE IS DIRECT 30% TAX ON PROFIT.
    SO THIS POINT IS ALSO TO BE RAISED SO THERE IS NO HARDSHIP TO TAX PAYER.
    AS ALLOWING INTEREST AND REMUNARATION TO PARTNERS FROM PROFIT OF FIRMS AS THERE IS IF NO SECTION 44AD OPTED.
    THANKS

  5. parag rathi says:

    Sir,in my view the finance act has made the proposed amend ment under section 44AB from AY 2017-18.Thus amendment in section 44AB become an consequental amendment under these above sections of TDS as they have referred only the clauses of section 44AB and not specified the amount.

    Please reply me if I am getting it wrong somewhere.

  6. sriram says:

    Where is exemption given from deducting TDS for those who opts for 44AD

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