Computation Of Total Income (retailer)
This query is : Resolved
02 October 2007
hi,
ny query was regarding computation of income
A retailer having most of the transac tions on cash basis, retailers need to disclose round about 5% of the turnover. But can it be furnished if there is no bank statement to support all the transactions or is it the way it is done.
turnover is around 500000
5% comes to around 25000
but the income is around 90000 to 100000
Which is the way to go about
kindly advice...
ny query was regarding computation of income
A retailer having most of the transac tions on cash basis, retailers need to disclose round about 5% of the turnover. But can it be furnished if there is no bank statement to support all the transactions or is it the way it is done.
turnover is around 500000
5% comes to around 25000
but the income is around 90000 to 100000
Which is the way to go about
kindly advice...
02 October 2007
Kindly Advice...
02 October 2007
The computation of deemed income of retailers is bases on turnover . To support your figures of turnover you should have some evidence ....say VAT return , cash memos , etc .
If your turnover is less than 40 lacs , then only this provision is applicable .
The deemed income is 5% of the turnover or actual income whichever is higher . As such you should disclose the higher figure .
If your turnover is less than 40 lacs , then only this provision is applicable .
The deemed income is 5% of the turnover or actual income whichever is higher . As such you should disclose the higher figure .
02 October 2007
As retailer income comes nearer to the limit specified by the IT Act. File income tax return by showing profit of Rs. 1 lakh and on which there is no tax and not to go for section 44AF.
For example, if the retailer enjoys a 30 or 35 per cent margin on sale Rs 10 lakhs, his income would be Rs 3 lakhs or 3.5 lakhs. He would opt the opportunity to show a lower income offered by Section 44AF, which deems that he has earned only 5 or higher i.e.10 or 15 per cent, that is, Rs 1 lakh/1.5 lakhs
As per Law:
The scheme of Section 44AF is to give an incentive to those retailers who enjoy a profit margin of more than 5 per cent. For example, in the question posed by you, if the retailer enjoys a 20 per cent margin, his income would be Rs 1 lakh. He would not let go the opportunity to show a lower income offered by Section 44AF, which deems that he has earned only 5 per cent, that is, Rs 25 thousands.
To be sure, the section contemplates a scenario where a retailer enjoying a higher profit would declare such higher income in his return.
But then this is simply not going to happen on ground given the fact that the section seeks to extract tax at the least on 5 per cent of one's turnover and does not compel one to cough up tax on the higher income vis-à-vis the statutorily presumed one.
But if one says his actual income is not even the deemed 5 per cent, he has to prove his case by maintaining books of accounts and getting them audited under Section 44AB. This is an entirely fair regime.
For example, if the retailer enjoys a 30 or 35 per cent margin on sale Rs 10 lakhs, his income would be Rs 3 lakhs or 3.5 lakhs. He would opt the opportunity to show a lower income offered by Section 44AF, which deems that he has earned only 5 or higher i.e.10 or 15 per cent, that is, Rs 1 lakh/1.5 lakhs
As per Law:
The scheme of Section 44AF is to give an incentive to those retailers who enjoy a profit margin of more than 5 per cent. For example, in the question posed by you, if the retailer enjoys a 20 per cent margin, his income would be Rs 1 lakh. He would not let go the opportunity to show a lower income offered by Section 44AF, which deems that he has earned only 5 per cent, that is, Rs 25 thousands.
To be sure, the section contemplates a scenario where a retailer enjoying a higher profit would declare such higher income in his return.
But then this is simply not going to happen on ground given the fact that the section seeks to extract tax at the least on 5 per cent of one's turnover and does not compel one to cough up tax on the higher income vis-à-vis the statutorily presumed one.
But if one says his actual income is not even the deemed 5 per cent, he has to prove his case by maintaining books of accounts and getting them audited under Section 44AB. This is an entirely fair regime.
02 October 2007
If your profits are more ......eventually it will get invested .....a lower declared profit will not cover such investment .......may attract provisions of unexplained investments .....another deemed income provision .
As such it is advised that if actua profit is higher , higher should be declared
As such it is advised that if actua profit is higher , higher should be declared
02 October 2007
[Special provisions for computing profits and gains of retail business.
44AF. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee engaged in retail trade in any goods or merchandise, a sum equal to five per cent of the total turnover in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum as declared by the assessee in his return of income shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession” :
Provided that nothing contained in this sub-section shall apply in respect of an assessee whose total turnover exceeds an amount of forty lakh rupees in the previous year.
(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed :
Provided that where the assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.
(3) The written down value of any asset used for the purpose of the business referred to in sub-section (1) shall be deemed to have been calculated as if the assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.
(4) The provisions of sections 44AA and 44AB shall not apply in so far as they relate to the business referred to in sub-section (1) and in computing the monetary limits under those sections, the total turnover or, as the case may be, the income from the said business shall be excluded.]
41[(5) Notwithstanding anything contained in the foregoing provisions of this section, an assessee may claim lower profits and gains than the profits and gains specified in sub-section (1), if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB.]
44AF. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee engaged in retail trade in any goods or merchandise, a sum equal to five per cent of the total turnover in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum as declared by the assessee in his return of income shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession” :
Provided that nothing contained in this sub-section shall apply in respect of an assessee whose total turnover exceeds an amount of forty lakh rupees in the previous year.
(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed :
Provided that where the assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.
(3) The written down value of any asset used for the purpose of the business referred to in sub-section (1) shall be deemed to have been calculated as if the assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.
(4) The provisions of sections 44AA and 44AB shall not apply in so far as they relate to the business referred to in sub-section (1) and in computing the monetary limits under those sections, the total turnover or, as the case may be, the income from the said business shall be excluded.]
41[(5) Notwithstanding anything contained in the foregoing provisions of this section, an assessee may claim lower profits and gains than the profits and gains specified in sub-section (1), if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB.]
02 October 2007
In case the income is not offered u/s44AF the repercussions of sec 40A(3) are also to be observed in addition to the higher income offered.
04 October 2007
thks a lot for all the support...
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