Short notes on Section 44AD

Short notes on Section 44AD

Section 44AD:-

Income Of Any Business Presumed To Be 8 %

Applicability:-

Eligible Assessee means Resident:-Individual/HUF/Partnership Firm

Eligible Business:-

  • All types of business except business covered u/s 44AE/Agency/Commission/Brokerage
  • Turnover does not exceed Rs 2 Crore in Previous Year.
  • If all above conditions are satisfied then assessee can declare estimated income from business 8% of total turnover or more.

Non Applicability:-

  • Non Resident:-Individual/HUF/Partnership firm (excluding Limited Liability Partnership Firm)
  • Company/LLP/BOI /AOP
  • Turnover exceeds Rs 1 Crore (2 crores with effect from FY 2016-17) in Previous Year
  • Professional
  • Assessee has not claimed deductions u/s 10A/10AA/10B/10BA/80HH/80RRB in relevant previous year.
If Assessee opts for Sec 44AD and declares his income as 8 % of total turnover or more he should consider following points:
  • Not allowed to claim any expenses or depreciation i.e. expenses covered u/s 30 to 38.
  • Salary, Remuneration or Interest paid to partner u/s 40(b) shall not be allowed as deduction.
  • Maintenance of books of accounts u/s 44AA and Audit u/s 44AB not required.
  • Advance Tax rules will apply, however assessee may opt to pay advance tax by 15th March of Financial Year.
  • Where an assessee declares profit for any previous year u/s 44AD and he declares profit for any of the five consecutive succeeding years not in accordance with the provisions of this section, he shall not be eligible to claim the benefit of the provisions of this section for five subsequent years succeeding the year in which the profit has not been declared in accordance with the provisions of Section 44AD(1).
  • If there is disallowance of any expenses it will be assumed that it has been already made in calculation of estimated profit.
Conclusion:
This step is being taken to encourage these businesses to move towards a less cash economy and to incentive's small traders / businesses to proactively accept payments by digital means.