CA Gautam Joshi
As we all know that Government has continuously making changes in applicability of Section 44AD eg. 40 lacs to 60 Lacs, 60 Lacs to 1 crore and now its 2 crore.
Being an entrepreneur first, I had lot of disappointments on increase of limit as now there will be lesser business men falling under the tax audit bracket. While secondly, I was really happy all business men who want to show profit lesser than 8% or 6 % in respect of the amount of total turnover or gross receipts which is received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed fall under the bracket of tax audit though not directly but indirectly.
It is actually shocking why central government is unnecessarily introduce these conflicting provisions where once audit limit starts from Rs. 100 lakh and on the other side profit percentage if less then @ 8% or 6 % in respect of the amount of total turnover or gross receipts which is received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed again attracts maintenance of accounts and conduct of audit. In scheming black transactions, is it that government indirectly curbs the very business itself? Practically, only option remains with all business men is to fix their profit margin @ 8% or 6% as the case may be. How much difficult is for a business to digest its profit margin being decided by drafting authorities? Only a business man knows.
On top of all, question arises why business men should maintain books of accounts if income tax authorities are not going to ask for the same? Actually, books of account throws a clear picture of any business and is the only reliable source for outside parties like insurance companies, visa authorities, financial institutions etc. One may save few bucks of income tax through these presumptive provisions but then it may be cumbersome for them to get visa, insurance, finance or to sponsor. Think of the situation where you saved few bucks of income tax but you could not show enough wealth for your son’s foreign education just because you followed the presumptive taxation. Section 44 AD could be a escaping window only and can never be an inspiration for tax or wealth planning.
What is suggested here is to always prepare books of account because there is something called self-assessment too.
CA Gautam Joshi, Email:- firstname.lastname@example.org
Republished with Amendments