Extract of Section – 44AD of Income-tax Act, 1961

Special provision for computing profits and gains of business on presumptive basis.

44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession” :

Provided that this sub-section shall have effect as if for the words “eight per cent”, the words “six per cent” had been substituted, 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 during the previous year or before the due date specified in sub-section (1) of section 139 in respect of that previous year.

(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed.

(3) The written down value of any asset of an eligible business shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.

(4) Where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five 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 sub-section (1).

(5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee to whom the provisions of sub-section (4) are applicable and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.

(6) The provisions of this section, notwithstanding anything contained in the foregoing provisions, shall not apply to—

 (i)  a person carrying on profession as referred to in sub-section (1) of section 44AA;

(ii)  a person earning income in the nature of commission or brokerage; or

(iii)  a person carrying on any agency business.

Explanation.—For the purposes of this section,—

(a)  “eligible assessee” means,—

 (i)  an individual, Hindu undivided family or a partnership firm, who is a resident, but not a limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009); and

(ii)  who has not claimed deduction under any of the sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading “C. – Deductions in respect of certain incomes” in the relevant assessment year;

(b)  “eligible business” means,—

 (i)  any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE; and

(ii)  whose total turnover or gross receipts in the previous year does not exceed an amount of 58[two crore rupees].

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Category : Income Tax (27493)
Type : Articles (16967)
Tags : section 44AB (137) Section 44AD (121) Tax Audit (264)

17 responses to “Section 44AD: Presumptive Taxation for Business Income”

  1. Yogi says:

    Whether turnover for the purpose of section 44AD shall be inclusive of GST??? or net of GST??

  2. Nandakumar G says:

    Abolish Personal Income Tax all together and save time & money of both the Individuals & the Government. this is a counterproductive tax as on date, with scope of assured GST collection. Government should concentrate on Corporate tax and other sources of income than waste the time of wealth generators with more and more complicated & implicating schemes such as this. These individuals will generate more wealth which they are going to either Save or spend. Either way they will be helping the government either directly or indirectly. Why kill their incentive by such complicated taxation policy !

  3. Samadhan says:

    sir I Declare my income below 8% or 6% and my total turnover is below 1 crore is applicable to me section 44AB under income tax act becase tax audit is applicable who turnover is exceeding 1 crore

  4. satyanarayan chatla says:

    The main purpose of this section is diluted.

  5. vidya says:

    If One Opts out of the scheme in third year, then 44Ad will not be available for next five year.
    In third year Audit will be applicable.
    I want whether Audit will also be applicable in the next five years in which 44AD not allowed even though we declare income above 8%?

  6. CA Hitesh says:

    WHAT ARE OBJECTIVES OF ARUN JATITELY WANTS TO ARCHIVE BY BRINGING these AMENDMENTS OF 5 YEARS COPMULSION.HOW ONE CAN PREDICT WHAT WILL HAPPEN IN 5 YEARS.THIS AMENDMENT WILL LEAD TO LEVY TAX ON LOSSES !! I HAVE SEEN THAT AFTER THE DEATH OF FATHER, HIS UNDER GRADUATE SON INCURRED HEAVY LOSSES BY BAD DEBTS, REDUCED TURNOVER. THE AMENDMENT IS UNJUST UNFAIR AND UNCONSTITUTIONAL.ICAI MUST FILE WRIT AGAINST THIS PROPOSAL.UNLUCKILY OUR FM HAS 1 GOAL I.E.TO COLLECT MAXIMUM TAX. HE IS FIT FOR TAX RECOVERY OFFICER JOB TO CATH HOLD OF MODIS & MALLAYAS, HAS VERY NARROW VISION.

  7. sudarshan says:

    Yes. but they have substituted subsec 5 . In the new subsection this conditions is introduced.

  8. CA Hitesh says:

    If after opting for presumptive tax in the 1st year, the TO increases above 2 crores in next year, the tax audit is mandatory.And again in 3 rd year TO falls below 2 crores, the period of 5 years would be counted from 3 rd year. In short, clarity is needed in case of fluctuating TO

  9. MINAL JAIN says:

    whether TDS are required to be deduct if he opt 44AD.

  10. SUNIL PATIL says:

    useful and timely information.

  11. VIKRANT BHARDWAJ says:

    YES I AM ABSOLUTELY AGREED WITH THESE WORD OF SH B.S.K.RAO Mostly IAS/IRS officials sitting in AC Rooms are involved in framing laws in India. These IAS/IRS Officials are grown up in the atmosphere of slaves & dogs in their house. Hence, they do not understand practical problems at gross root level. CONSEQUENTLY SAME CAN BE SEEN IN GST IMPLEMENTATION WITHOUT GIVING PROPER TIME AND GUIDANCE VERY COMPLEX SOFTWARE IS IMPLEMENTED MISTAKE IS HUMAN PHENOMENA WHAT IS THE USE OF THIS SOFTWARE IF WE CANT’T OUR MISTAKE AND IN SPITE OF THAT PENALTY CLAUSE ARE VERY HARSH AND DIFFICULT GST COUNCIL HAS TO GIVE TRIAL UPTO 31ST MARCH 2018 TO FULLY OPERATION OF THIS SOFTWARE SO THAT PEOPLE CAN BETTERLY. GST SITE IS MOSTLY ON TRIAL BASIS CLOSED AT NIGH UPTO 3:30 AM AND ANY QUERY REPLY COMES FROM GST HELP DESK AFTER 20 DAYS WITH COMMENT YOUR PROBLEM IS RESOLVED WITHOUT ANY ACTION HELP DESK IS NOT FULLY OPERATIVE AND DECISION MAKING EVEN INCOME TAX HELP DESK IS EFFICIENTLY REPLIED THE QUERY . SO GST HAS TO THINK ABOUT THIS.

  12. Gokulesh says:

    Respected sir, is there any clarity on whether assessee can claim interest on capital or remuneration to working partners? Because they fall beyond section 38. Please clarify on this point taking into account the present stand of law as this article is silent on above issue although it is clear on. Sec 80 dedication. Thanking you Gokulesh

  13. Tax.Adv.BSKRAO says:

    Why complicated tax laws in India only ? Reasons are as under:-

    (1) Persons involved in framing laws in India does not have legal background. Even in Ministry of law who approve the laws does not have persons with legal background.
    (2) Mostly IAS/IRS officials sitting in AC Rooms are involved in framing laws in India. These IAS/IRS Officials are grown up in the atmosphere of slaves & dogs in their house. Hence, they do not understand practical problems at gross root level.
    (3) IAS/IRS Officials wants to show their supremacy by turning out the verdicts of High Courts & Supreme Court of India by amending the laws as such.
    (4) Indian Politicians are not educated enough to understand the tax laws framed by IAS/IRS Officials to raise objection in the legislature. Hence, they prefer not to be present in legislature while passing money bills.
    (5) Stake holders suggestions are not considered by respective Ministry, but kept aside blindly.

    B.S.K.RAO, B.Com, LL.B, MICA,
    Auditor & Tax Advocate,
    BDKRAO, Beside SBI,
    Shimoga-577201, KARNATAKA
    E-Mail : raoshimoga@gmail.com
    Mo No. : 0-9035089036

  14. ASHOK KUMAR KANUNGA says:

    A.Y 2017-18 –DECLARED N/P 8%–T.O BELOW 2 CRORS— INDIVIDUAL CASE. NOW A.Y 2018-19–T.O IS MORE THAN 2 CRORS — HAVE TO DO COMPULSORY AUDIT U/S 44AB. IF NEXT YEAR THAT IS A.Y 2019-20. T.O BELOW 2 CRORS BUT N/P DECLARED MORE THAN 8% THEN TAX AUDIT U/S 44AB IS REQUIRED OR NOT??

  15. RITESH BAHETI says:

    I THINK CONDITION OF INCOME EXCEEDS Rs 2,50,000/- IS NOW REMOVED FROM AY 2018.2019 & THEREFORE “if assessee’s total income exceeds the maximum amount not chargeable to income-tax, Tax Audit under section 44AB(e) will be necessary ” IS NOT CORRECT
    I THINK AS PER SECTION 44AD, EVEN THOUGH HIS INCOME DOES NOT EXCEEDS MAXIMUM AMOUNT CHARGEABLE TO INCOME TAX HE HAS TO SHOW 8 OR 6% AS CASE MAY BE OR GET HIS ACCOUNTS AUDITED
    COMPARE THE PROVISIONS OF 44AD UPTO 31.03.2017 & 31.03.2018 NOW THEY HAVE REMOVED THE WORD, “INCOME DOES NOT EXCEEDS MAXIMUM AMOUNT CHARGEABLE TO INCOME TAX ”

    PLEASE CONFIRM THE ABOVE

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