CA Agarwal Sanjay ‘Voice of CA’

Section 44AD of the Income Tax Act,1961 – Special provision for computing profits and gains of business on presumptive basis

Applicability –The amended provisions of this section are applicable with effect from 1st April, 2011 and will accordingly apply in relation to assessment year 2011‐12 and subsequent assessment years.

Reason for introducing new scheme for presumptive taxation

1. There has been a substantial increase in small businesses with the growth of transport and communication and general growth of the economy. A large number of businesses and service providers in rural and urban areas who earn substantial income are outside the tax‐net.

2. Introduction of presumptive tax provisions in respect of  small  businesses  would  help  a  number  of  small  businesses  to  comply  with  the  taxation provisions without consuming their time and resources.

3. To  lowers  the  compliance  cost for  small  taxpayers  & also  reduces  the administrative  burden  on  the  tax machinery.

4. To  expand  the  scope  of presumptive  taxation  to  all businesses.

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