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44AD and salary to partners

deepak v (43 Points)

20 July 2020

Can I claim deduction of salary to partners from the profits computed under 44AD ?
Further would there be any disalowamces like 40A(3)???

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8 Replies

RAJA P M ("Do the Right Thing...!!!") (128091 Points)
Replied 20 July 2020

Your query is not cleared...
Elobrate with correct details...

1 Like

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Lokesh (student) (23 Points)
Replied 20 July 2020

No. As per Section 44AD Presumptive Taxation, all the expenditure have been deemed to be allowed. Therefor no deduction of salary will be allowed.

CA. Chikkerur C R (PRACTICE) (3584 Points)
Replied 20 July 2020

No salary can be claimed under 44AD

deepak v (43 Points)
Replied 20 July 2020

Thank you for the answers.... however In the section it is clearly mentioned all expenses from 30 to 38 is deemed to be allowed...however this deduction does not fall in this section...how can we solve this dilemma??

CA Payal Gupta (Chartered Accountant) (154 Points)
Replied 20 July 2020

Dear Deepak,

Referring to your query, please consider my below-mentioned views:

Section 44AD(1) starts with“Notwithstanding Anything to contrary contained in section 28 to 43C”, which means section 28 to 43C of Income Tax Act, 1961 is not applicable on eligible assessee carrying on an eligible business under section 44AD. Hence, no disallowance 40A(3)can be made.

Please do let us know in case of any concerns.

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deepak v (43 Points)
Replied 20 July 2020

And that is crystal clear...thank you sir....
Thank you all gentlemen for your precious time

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abdulqadir (ca) (72 Points)
Replied 23 July 2020

Sir for Tax audit Limit has been Increased to 5cr by finance act 2020

But correspond Effect has not been given in 44ad

so suppose assesee turnover is 3cr and his cash payment or reciept is less than 5 percent

so he avoid taxuaidt and show profit less than 6 %?

1 Like

CA Payal Gupta (Chartered Accountant) (154 Points)
Replied 23 July 2020

@ Abdulqadir,

Referring to your query, please refer the following views:

Applicability of Tax Audit u/s 44AB

Business: If total annual turnover, sales, or gross receipts exceeds INR 1 crores.

Applicable from 01.04.2020, where the aggregate of all amount received including the amount received from sale, turnover, and aggregate of all payments made including amount incurred for expenditure, in cash, the following will be the provisions applicable for tax audit:

	% of Aggregate of the amount received in Cash and expenditures paid in cash
	More than 5%	Less than 5%
Tax Audit limit	1 Crores	5 Crores

Now come to your question, In case turnover is INR 3 Cr. and Receipt or payment is less than 5%, then under normal provisions Tax Audit will not be applicable.

And under section 44AD, you cannot avail presumptive benefit as your turnover limit exceeds INR 2Cr.

Further, please note that if you show your income or profit less than 6% or 8% as the case may be in Section 44AD then Tax Audit will be applicable in any case accordingly.