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Tojo Thomas (Finance Manager) (74 Points)

17 December 2016

Can one show more than 8% of turnover as profit under section 44ad, and file the return??????

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15 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177741 Points)
Replied 17 December 2016

Why not? That's way it should be!!!

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Tojo Thomas (Finance Manager) (74 Points)
Replied 17 December 2016

According to my understanding under section 44AD. 8% should be the profit , right. Then how can one show more than 8% profit under section 44 AD. Then whaths the relevenace of section 44AA

ankita gandhi (student) (5908 Points)
Replied 17 December 2016

Yes they can show.
The only problem is u can't show below 8 as then u need audit.

Tojo Thomas (Finance Manager) (74 Points)
Replied 17 December 2016

Then whats the difference between 44AA & 44AD,. ?

Tojo Thomas (Finance Manager) (74 Points)
Replied 17 December 2016

If that is the scenario, one can file return by simply showing 20% or 30% as profit of gross receipts , and file return under section 44AD, and he does not need to maintain proper books of accounts. Then whats the difference between one maintianing books under section 44AA & one adopting section 44AD?

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Yugandhar (CA) (124 Points)
Replied 17 December 2016

44AD is for business not for professionals.
44ADA is for professionals and income assumed to be 50%

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177741 Points)
Replied 17 December 2016

Let me reproduce the section for your better understanding:

44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, 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".

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177741 Points)
Replied 17 December 2016

Secondly, its for small business TO under 2 Cr. for Ass yr. 2017-18.

When an assessee does't want any trouble of maintaing books of accounts, he can declare the profits under the section and get relief. Otherwise he is free to maintain books as per section 44AA.

But if he has profits below the specified percentage, he has to keep the accounts as per section 44AA and even get it audited.

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ShivangiPatel (Article) (22 Points)
Replied 17 December 2016

One can show profit above 8% but after filling return sauch a ways for example if have shiwn profit of 10% than i have to sumbit profit and loss accounts and balance sheet

other wise return will be considered as defective and you sumbit a rply for that

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177741 Points)
Replied 17 December 2016

@ Sivangi: if its your query, my experience is totally opposite. None of my filed ITR 4S return had been defective, where different profit percentages from 8 to 35 were declared. Wrongly filed ITR 4 (specifically with No account Case) has seen this year selected as defective !!!

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Avinash Kumar (CA-Final Students) (192 Points)
Replied 17 December 2016

Yes you can declare more than 8% percent income.

Avinash Kumar (CA-Final Students) (192 Points)
Replied 17 December 2016

Yes you can declare more than 8% percent income.

Sanjay S (Chartered Accountant) (1375 Points)
Replied 17 December 2016

The following are excerpts from the 'ADVANCED LEARNING ON SECTION 44AD (Theory)' document hosted on IncomeTaxIndia.gov.in

(Refer link: https://www.incometaxindia.gov.in/tutorials/section-44ad-theory.pdf)

"Declaration of higher income

As regards the declaration of higher income, i.e., declaring income above the prescribed rate of 8%, the scheme permits the assessee to declare at his option higher income (i.e., higher than 8%).

Illustration

Mr. Saurabh is running a provision shop and the gross receipt of the business during the previous year 2012-13 is Rs. 24,48,252. His actual income is Rs. 2,84,848 which is higher than Rs. 1,95,860 (i.e., 8% * Rs. 24,48,252). In this case can he declare the actual income which is higher than the limit prescribed under section 44AD? **

As per the provisions of section 44AD, if the actual income from the business covered under section 44AD is higher than the income prescribed under the presumptive scheme, then the assessee has to declare such higher income from aforesaid business. Thus, in this case Mr. Saurabh can declare higher income."

On a Conclusive note, you can (& Should) show higher income if your actual profit is more than 8% of Gross Receipts. There is no provision in section 44AD or any other section for that matter, preventing you from declaring Higher income. The Dept will be more than happy to receive it with extended arms & a smile.

Also, please refer thread for a comprehensive discussion on the likes of this topic:

/forum/details.asp?mod_id=377832&offset=1

Shivam Jain (Student CA Final ) (92 Points)
Replied 17 December 2016

1. 44AD is a section for small businesses who don't want to maintain books of accounts.
44AA provides for maintenance of books of accounts for specified persons other than those covered in 44AD.

2. You've to show atleast 8% of gross receipts as income. This means you may show more than 8% as income.