Presumptive Tax for Business Support Services
This query is : Resolved
29 December 2022
I provide business support services like the following for a private limited company. This private limited company is into the business of providing high end coding and non coding software service providers like program managers, project managers, Dev leads, programmers etc(body shoppers).
I have a GST registration and have business support services upto 60 Lakhs every year. I file all GST returns and have been filing my tax returns under 44AD, under presumptive income of 8% or 6%. I provide the following services:
a. Help the company with a few cash payments for low jobs, consultants etc
b. Organize games/cricket amusement facilities for the employees and consultants for the company.
c. Help the company is preparation of payroll, and supplier payments.
d. Provide resumes for Technical/Non Technical by using the company's database and external data bases like Naukri,Dice etc. Ours is non technical expertise with the final interview and finalization vested with the company. I get paid a small cut on every hour's billing from the consultant. The company manages the billing, time cards, hours of the consultant and I don't have any visibility.
e. Finally any other odd jobs like finding a security personnel, maids, arranging lunches, house keeping expenses etc.
Am I correct in filing my tax return under Presumptive Tax basis of 8%?
I have a GST registration and have business support services upto 60 Lakhs every year. I file all GST returns and have been filing my tax returns under 44AD, under presumptive income of 8% or 6%. I provide the following services:
a. Help the company with a few cash payments for low jobs, consultants etc
b. Organize games/cricket amusement facilities for the employees and consultants for the company.
c. Help the company is preparation of payroll, and supplier payments.
d. Provide resumes for Technical/Non Technical by using the company's database and external data bases like Naukri,Dice etc. Ours is non technical expertise with the final interview and finalization vested with the company. I get paid a small cut on every hour's billing from the consultant. The company manages the billing, time cards, hours of the consultant and I don't have any visibility.
e. Finally any other odd jobs like finding a security personnel, maids, arranging lunches, house keeping expenses etc.
Am I correct in filing my tax return under Presumptive Tax basis of 8%?
10 July 2024
Based on the services you provide, let's analyze whether filing your tax return under the Presumptive Taxation Scheme (Section 44AD) at 8% or 6% is appropriate:
### Eligibility for Section 44AD (Presumptive Taxation Scheme):
1. **Nature of Services Provided:**
- You provide business support services such as cash payments for small jobs, organizing recreational activities, payroll preparation, supplier payments, and recruitment support.
- These services do not fall under the specific categories excluded from the scope of Section 44AD (like professional services involving specialized skill and knowledge).
2. **Annual Turnover Limitation:**
- The annual turnover threshold for availing Section 44AD is up to 2 crore rupees.
- You mention your business support services turnover is up to 60 lakhs every year, which is within the turnover limit.
### Analysis of Services Provided:
- **Type of Services:** Your services mainly fall under general business support rather than specialized professional services like legal, medical, engineering consultancy, etc. The key services you provide are administrative in nature and support the operational activities of the company.
- **Billing and Revenue Model:** Your revenue seems to be primarily generated through a service fee or commission basis (e.g., getting a small cut on consultant billing hours).
### Conclusion:
Given the nature of your services and the turnover amount mentioned (up to 60 lakhs per year), it appears reasonable to file your tax return under Section 44AD, presuming your turnover does not exceed 2 crore rupees. Here's why:
- **Section 44AD Benefit:** This scheme allows for a presumptive income calculation at a rate of 8% (if receipts are via digital mode) or 6% (if receipts are via any other mode) of the turnover or gross receipts declared.
- **Simplicity and Compliance:** It simplifies tax compliance by offering a presumptive taxation method, reducing the burden of maintaining detailed books of accounts.
### Steps to File under Section 44AD:
1. **Compute Turnover:** Calculate your turnover for the financial year from all your business support activities.
2. **Presumptive Income Calculation:**
- Apply the prescribed percentage (8% or 6%) on the total turnover as per the mode of receipts.
3. **File Tax Return:**
- Report your presumptive income in your income tax return (ITR) under the applicable section and pay taxes accordingly.
- File your GST returns as per GST regulations.
### Consultation:
It's advisable to consult with a tax advisor or chartered accountant who can review your specific business operations and financials in detail. They can confirm whether filing under Section 44AD is suitable and ensure compliance with all tax laws and regulations applicable to your business.
By following these steps and seeking professional advice, you can ensure that your tax filing is accurate and in compliance with Indian tax laws.
### Eligibility for Section 44AD (Presumptive Taxation Scheme):
1. **Nature of Services Provided:**
- You provide business support services such as cash payments for small jobs, organizing recreational activities, payroll preparation, supplier payments, and recruitment support.
- These services do not fall under the specific categories excluded from the scope of Section 44AD (like professional services involving specialized skill and knowledge).
2. **Annual Turnover Limitation:**
- The annual turnover threshold for availing Section 44AD is up to 2 crore rupees.
- You mention your business support services turnover is up to 60 lakhs every year, which is within the turnover limit.
### Analysis of Services Provided:
- **Type of Services:** Your services mainly fall under general business support rather than specialized professional services like legal, medical, engineering consultancy, etc. The key services you provide are administrative in nature and support the operational activities of the company.
- **Billing and Revenue Model:** Your revenue seems to be primarily generated through a service fee or commission basis (e.g., getting a small cut on consultant billing hours).
### Conclusion:
Given the nature of your services and the turnover amount mentioned (up to 60 lakhs per year), it appears reasonable to file your tax return under Section 44AD, presuming your turnover does not exceed 2 crore rupees. Here's why:
- **Section 44AD Benefit:** This scheme allows for a presumptive income calculation at a rate of 8% (if receipts are via digital mode) or 6% (if receipts are via any other mode) of the turnover or gross receipts declared.
- **Simplicity and Compliance:** It simplifies tax compliance by offering a presumptive taxation method, reducing the burden of maintaining detailed books of accounts.
### Steps to File under Section 44AD:
1. **Compute Turnover:** Calculate your turnover for the financial year from all your business support activities.
2. **Presumptive Income Calculation:**
- Apply the prescribed percentage (8% or 6%) on the total turnover as per the mode of receipts.
3. **File Tax Return:**
- Report your presumptive income in your income tax return (ITR) under the applicable section and pay taxes accordingly.
- File your GST returns as per GST regulations.
### Consultation:
It's advisable to consult with a tax advisor or chartered accountant who can review your specific business operations and financials in detail. They can confirm whether filing under Section 44AD is suitable and ensure compliance with all tax laws and regulations applicable to your business.
By following these steps and seeking professional advice, you can ensure that your tax filing is accurate and in compliance with Indian tax laws.
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