17 July 2017
Assessee having income of profession below 50,00,000/- whether assessee need to done tax audit if profit is below 50%? and if he opt. for presemptive taxation what will be the impact?
17 July 2017
yes he would be required to get the audit done. In case he wants to go for presumptive taxation, then there is no impact except for higher tax outgo.
31 July 2024
In India, the tax treatment for professionals with income below ₹50,00,000 is governed by Section 44ADA of the Income Tax Act. Here are the relevant points regarding the questions you have:
### Tax Audit Requirement
1. **Income Below ₹50,00,000 and Profit Below 50%:** - **Presumptive Taxation under Section 44ADA:** If a professional opts for presumptive taxation under Section 44ADA, it is presumed that their profit is 50% of their gross receipts. - **No Tax Audit Required:** If the professional's gross receipts are below ₹50,00,000 and they declare 50% or more of their gross receipts as income, no tax audit is required.
- **Not Opting for Presumptive Taxation:** If a professional does not opt for presumptive taxation and declares income less than 50% of their gross receipts, they would need to maintain books of accounts and may be required to get a tax audit done if their income exceeds the basic exemption limit (₹2,50,000 for individuals below 60 years of age).
### Impact of Opting for Presumptive Taxation under Section 44ADA
1. **Simplified Income Calculation:** - Professionals opting for Section 44ADA can declare 50% of their total gross receipts or turnover as their income. - This simplifies the accounting process as they do not need to maintain detailed books of accounts.
2. **No Requirement for Tax Audit:** - By declaring income at the presumptive rate of 50%, they are exempt from the tax audit requirement if their gross receipts are below ₹50,00,000.
### Lower Limit for Income
- There is no specific lower limit of income for applying the presumptive taxation scheme under Section 44ADA. However, to benefit from this scheme: - The professional must be engaged in an eligible profession (e.g., legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, etc.). - Their gross receipts should not exceed ₹50,00,000 in a financial year.
### When to Take 50% of Receipts as Profit
- **Income from Profession Between ₹2,50,000 and ₹50,00,000:** - A professional can opt for presumptive taxation if their gross receipts are more than ₹2,50,000 and up to ₹50,00,000. - They can declare 50% of their gross receipts as their income.
### Summary
- Professionals with gross receipts below ₹50,00,000 can opt for the presumptive taxation scheme under Section 44ADA, declaring 50% of their receipts as income. - If they declare 50% or more of their receipts as income, they do not need to undergo a tax audit. - There is no lower limit on gross receipts to apply Section 44ADA, but gross receipts should not exceed ₹50,00,000. - If a professional does not opt for presumptive taxation and their income is less than 50% of gross receipts, a tax audit may be required if their income exceeds the basic exemption limit.
This simplified approach under Section 44ADA is designed to ease the compliance burden for small professionals and encourage them to declare their income transparently.
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