During a discussion with my auditor on the presumptive income scheme, we considered a scenario where a person earns from tuitions. He charges Rs 5,000 per student per month and there are four sessions a day with 10 students. The total income for 12 months amounts to Rs 24,00,000.
Education services under business codes 17001 to 17007 fall under 44AD, not 44ADA. Specifically, it could be categorized under 17006 (Coaching centre tuitions) or 17007 (Other education services n.e.c). According to Section 44AD, assuming digital receipts, a minimum of 6% needs to be disclosed. Only Rs 1,44,000 needs to be declared as income, which is below the threshold.
When I mentioned to the auditor that I could accumulate wealth through investments made by the income, without being taxed, he disagreed, stating that the provision allows for declaring 94% of revenue as expenses, which shouldn't result in extensive wealth available for investment. He emphasized that since one is filing taxes on a small income, scrutiny would occur due to access to investment details by the tax department.
Is this how 44AD is to be interpreted? Do you agree with this?
CAclubindia
