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Income Tax : Join our 5-day live course from Sept 8-12, 2024, for an in-depth understanding of tax audits under Section 44AB, with practical in...
Income Tax : Join our live course from Aug 23-25, 2024, to master tax audits, including Form 3CD, financial statements, and GST, with practical...
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Govt is promoting small traders to do their trading through bank accounts due to cash shortage. Govt given option to these traders under section 44AD to pay 6% tax on total turnover made through bank accounts.
The change in the presumptive rate of 8% to 6% on digital transactions made by the govt. can be understood through the below examples
If a trader makes his transactions in cash on a turnover of Rs.Two Crore, then his income under the presumptive scheme will then be presumed to be Rs. 16 lakhs @ 8% of turnover.
Govt decides to reduce existing rate of deemed profit U/s. 44AD of Income Tax Act in respect of amounts/receipts through banking channel/digital means
Presumptive Income is the concept introduced by the Income Tax Department under the Presumptive Taxation Scheme so as to allow the assessee to disclose his income on presumptive basis under the relevant sections and their provisions thereof. Let us understand them in detail.
Section 44AB of the Income-tax Act (‘the Act’) makes it obligatory for every person carrying on business to get his accounts of any previous year audited if his total sales, turnover or gross receipts exceed one crore rupees. However, if an eligible person opts for presumptive taxation scheme as per section 44AD(1) of the Act, he shall not be required to get his accounts audited if the total turnover or gross receipts of the relevant previous year does not exceed two crore rupees.
This section is nothing but provides a relaxation to the tax payers to declare income on presumptive basis, which should not be less than 8% of the gross turnover or gross receipt during the financial year. However this relaxation is provided to certain persons and certain business subject to specified conditions which are provided under Sec 44AD of Income Tax Act, 1961. These certain business and certain persons are named as Eligible Business and Eligible Assessee in the Act. Let us discuss this Section.
Section 44AD widely affects the businesses in small sector. It was brought in its present shape by Finance Act 2009 wef AY 2011-12. It implies that legislature at that time thought it fit to take a year extra to have impact study of the section.
The existing provisions of section 44AD provide for a presumptive taxation scheme for an eligible business. Where in case of an eligible assessee engaged in eligible business having total turnover or gross receipts not exceeding rupees one crore, a sum equal to eight per cent.
1. A PRESUMPTIVE INCOME SCHEME FOR PROFESSIONALS The existing scheme of taxation provides for a simplified presumptive income scheme for persons engaged in business. The Committee was of the view that this scheme is quite popular amongst small traders. It was felt that there is a strong case for introducing a similar simplified presumptive income […]
