Presumptive scheme under Income tax is a popular scheme used by Businesses & Professionals. This scheme essentially reduces the burden of Income tax compliance on Micro & Small businesses & Professionals. Presumptive scheme for specified professionals was introduced in 2016.
Presumptive scheme allows the taxpayer to presume their income as a certain % of their Gross receipts or revenue Here we will discuss in detail about the Presumptive scheme available to professionals & which category of professionals can avail the scheme.
Presumptive scheme u/s 44ADA for professionals
As per section 44ADA, specified professionals have the option to opt for this scheme to calculate their taxable income. Under this scheme, a taxpayer can offer 50% of their gross professional receipts as taxable profits. However, such person can declare income higher than 50% as well. While, if a taxpayer claims the profits to be lower than 50%, in that case, he/she will be required to maintain books of accounts & get tax audit done.
A person who opts the presumptive taxation scheme is deemed to have claimed all deduction of expenses. Any further claim of deduction is not allowed after declaring profit @ 50%.
Who can avail this scheme?
Any resident Individual of partnership firm engaged in specified professions can avail this scheme. This scheme is not available to non-residents, LLPs & HUFs.
This scheme can be opted by specified professionals having Gross receipts up to Rs 50 lakhs in the financial year
What does specified professions include?
Sec 44ADA specifies below professions which are eligible to avail the presumptive scheme:
1) Legal
2) Medical
3) Engineering or architectural
4) Accountancy
5) Technical consultancy
6) Interior decoration
7) Any other profession as notified by CBDT
Also read: Tax aspects every freelancer in India should know
Can IT professionals avail the presumptive scheme u/s 44ADA?
Yes, IT professionals can avail presumptive scheme u/s 44ADA CBDT has time & again, notified professions which can avail the benefits of the presumptive scheme. Following were notified:
a) The profession of authorized representative
b) The profession of film artists (actor, cameraman, director, music director, art director, dance director, editor, singer, lyricist, story writer, screen play writer, dialogue writer and dress designer)
c) the Profession of Company Secretary
d) the Profession of Information Technology
Why does this scheme benefit to the professionals who opt for it?
Apart from allowing to presume the taxable income at 50% of Gross receipts/revenue. It has the following benefits:
1. Does away from maintenance of Books of accounts
2. Persons opting for the scheme can pay advance tax on or before 15th March of financial year
3. There is no restriction on opting out of the scheme unlike the 5 years restriction on businesses opting for presumptive scheme u/s 44AD.
What do one need to do in order to compute & file ITR under the presumptive scheme?
In order to compute the taxable income & file ITR under the presumptive scheme, one needs to simply follow the provisions of sec 44ADA, compute their gross receipts & income @ 50%, and report the same while filing ITR.
It must be noted that though the presumptive scheme does away with preparation of books of accounts, one must keep records to justify the calculation of gross receipts & to do compliance under other acts such as GST, doing so will aid to filing accurate GST returns.
Disclaimer: The above post is only for the purpose of academic discussion and should not be construed as any legal opinion in any matter whatsoever.
The author is a CA in practice at Delhi and can be contacted at: E-mail: [email protected], Mobile: +91-9811741451
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if you dont maintain books how can you claim the correct taxable income
Not Maintaining books imply we do not have to do the accounting of the business records like a normal business do. However, we need to keep records to ascertain & arrive at the correct taxable amount. We can always calculate or arrive at the correct taxable income by our own informal method without maintaining proper set of books