Section 44AD of the Income Tax Act, 1961 provides a simplified method of computing the business income of any business excluding the business plying, hiring or leasing goods carriages. The silent features are as under:
1. The scheme applies to a resident assesse being an individual, HUF or a partnership firm. The scheme is not applies to Limited Liability Partnership Firm. It will not be applicable to an assesse who has availed deductions under section 10A, 10AA, 10B or 10 BA or deductions under any provisions of Chapter VI-A.
2. The scheme is applicable to business except plying, hiring or leasing goods carries, whose total turnover or gross receipts in the previous year does not exceeded Rs.3,00,00,000, as against Rs. 2,00,00,000 up to assessment year 2023-24.
3. The profits and gains from the business shall be deemed to be 8% of the total turnover or gross receipts of the assesse in the previous year or a higher sum as may be declared by the assesse and the said deemed income as chargeable to tax under the head “ Profits and gains of business or profession”. As per provision 1 of this section, if the amount of total turnover or gross receipts which is received by an account payees cheque or an account payee bank draft or use of electronic clearing system through a bank account during the previous year calculated at the rate of 6% instead of 8%.
4. Any deduction allowable under section 30 to 38 shall be deemed to have been allowed and no further deduction under those sections shall be allowed from the deemed profits and gains. In the case of a firm, deduction u/s 40(b) i.e. interest and remuneration paid to working partner by a firm will not be allowed.
5. Depreciation on assets used for the said business shall also be deemed to have been allowed and written down value of the said assets shall be worked out on that basis.
6. The assesse is not required either to maintain books of accounts or to get the account audited. If the assesse wish to show his taxable income less than 8% or 6%, has to maintain books of account, and tax audit section 44AB is to be done.
7. The profits and gains computed above shall be aggregated with other income of the assesse and thereafter deduction under chapter VI-A and tax rebate under Chapter VIII, if any will be allowed.
8. The assesse who has opted this section, will have to pay only instalment of advance tax, i.e. 15th March is to be paid in full. So only one instalment of advance tax is to be paid, according there is change under section 234C so far interest on advance tax is to be calculated.
Section 44AD(4) provides that where an eligible assesse declares profit for any previous year in accordance with the provisions of section 44AD and he declares profit for any of the 5 assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of section 44AD(1), he shall not be eligible to claim the benefit of the provisions of section 44AD for 5 assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of section 44AD(1).
Provisions of sections 44AD shall not apply to a person:
1. carrying on profession as referred toin section 44AA(1);
2. earning income in the nature of commission or brokerage;
3. carrying on any agency business.
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