Presumptive Taxation Scheme: Section 44ADA of the Income Tax Act

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Presumptive Taxation Scheme: Section 44ADA of the Income Tax Act

Section 44ADA is a special provision for computing the profits and gains of little professionals in specific conditions. Section 44ADA was introduced to extend the plan of simplified presumptive tax to specified professionals. Earlier, the presumptive scheme of tax was appropriate just for small businesses. The presumptive scheme of taxation reduces the compliance burden on small professions and facilitates the ease of doing business. Under the presumptive scheme of taxation, profits are presumed at 50% of the gross receipts.

Eligible Professionals under Section 44ADA

Given below is a list of the Eligible Professions Under Section 44ADA:

  • Interior decorations
  • Technical Consulting
  • Engineering
  • Accounting
  • Legal
  • Medical
  • Architecture

Other eligible professionals include:

  • Movie artists include a producer, editor, actor, director, music director, art director, dance director, cameraman, singer, lyricist, story writer, screenplay or dialogue writer, and costume designers.
  • Authorized representative means a person who represents another person for a fee before a tribunal or any authority constituted under any law. It does not include an employee of the person so represented or a person who is carrying on the profession of accountancy.
  • Any other notified professionals.

Assesses Eligible for the Section 44ADA

The following Indian assessees are eligible:

  • Individuals
  • Hindu undivided families(HUFs)
  • Partnership firms (note that limited liability partnerships are not eligible)

Professionals whose total gross receipts are less than Rs 50 Lakh in a year are the eligible beneficiaries in order to avail the benefits of the Presumptive Taxation Scheme.

What benefits will an assessee get by following Section 44ADA?

By following Section 44ADA, an assessee would get the following advantages:

  • No need of keeping up books required under Section 44AA.
  • No requirement of having accounts audited under Section 44AB.

When shall an assessee maintain books and get the accounts audited?

On the off chance that an assessee meets the following standards, at that point he/she should keep up books and get accounts audited under Section 44AB:

  • Income from the profession is offered at a lower rate than half of the gross receipts.
  • The total income of the assessee is more than the basic exception.

All deductions for business expenses are deemed to have been allowed. Once profits are taxed at 50% of the gross receipts, the balance 50% is deemed to be allowed towards all the business expenses of the assessee.

For more information, visit the website of All India ITR

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