01 July 2011
can i file return for commission income as per sec 44 AD ? tds deducted on commission paid !!! what a standard ratio of net profit in such case as assessee incured expenditure for earning such commission!
01 July 2011
A question which is difficult to answer, without knowing property investments made by the assessee , savings, his estimated House Hold Expenses etc..etc.
In the absence of such information, if the commission income is say Rs 5.00 lac, show at least 60-70% of it as income in case expenses can not be properly substantiated.
One should show income after considering all such factors which may be subjected to question by the department.
First of all we should have a look on section 44AD. As per section 44AD return can be filed by an individual only for that business whose total turnover is upto 40 lacs. This section starts with a non obstante clause which overrides all the sections covered under section 28 to 43C, hence if filing return u/s 44AD then whatever the expenditure or whatever the actual net profit earned by a person that will be irrelevant and the person shall only be required to pay the taxes at slab rates on 8% of the gross turnover/ gross receipts. He can pay taxes on more than 8% amount if he likes but minimum 8% is mandatory. Hence, in case of paying taxes on not below the 8% minimum limit no need to maintain any books and no need to bother about actual expenditure. Even if you have 90% of gross receipts as income still u will be liable to pay tax on only 8% of gross receipts. Hence, your question about actual expenditure is irrelevant till the time you are paying taxes on 8% or above.
However, if you want to offer taxes on less than 8% then u have to maintain accounts and get them audited. In that case your question shall be relevant. But in my view in case of commission income it would be very unusual that a person has incurred expenditure more than 92% of the commission income which he has received. It would be very difficult to justify the tax authorities if no proper documentation maintained for the expenditure.
Hope all your queries are satisfactorily replied. Please let me know if any further clarification required.
03 July 2011
By Finance Act 2009, Section 44AD was amended w.e.f 01/04/2011, to include all other business except as mentioned in Section 44AE.
The limit is also enhanced from 40 lacs to 60 lacs by amendment made by Finance Act 2010.
In view of the above, you can disclose your income under 44AD with 8% or more profit and you will not required to maintain any books etc provided your commission income does not exceed 40/60 lacs limit
CAclubindia
