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Does presumptive tax scheme violate Alternate Minimum Tax rule ?

mack (Thinking-to-start-business) (154 Points)

30 December 2022

For AMT the taxable about will be higher of the following

Normal tax liability is levied on the normal applicable rate on taxable profit/Income.

AMT is levied at the rate of 15% on Adjusted total income adding applicable cess and surcharge (health and education cess) and surcharge(SC).

But presumptive u/s 44AD says 6% will be considered as taxable profit and on top of that normal tax slab applies so if the normal tax comes below the 15% rate of Adjusted total income and people are bound to follow the AMT rule then that is the benefit of adopting Presumptive tax scheme?.

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6 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177713 Points)
Replied 30 December 2022

Simply to say, 6/8% on maximum 2CRs. turnover is just 12to 16 lakhs, while AMT is applicable on 20 lakhs or more...

So, both are independent..

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mack (Thinking-to-start-business) (154 Points)
Replied 31 December 2022

Oh, my mistake I didn't calculate that.

I posted one more query at https://www.caclubindia.com/forum/can-a-legal-entity-amp-proprietor-have-multiple-gstin-within-same-state--595711.asp

can you please answer this one it is related to the Multiple Registration of GST within the same state for Proprietor is allowed or not ?

mack (Thinking-to-start-business) (154 Points)
Replied 31 December 2022

Suppose the turnover is 2 Crore

And the Actual Adjusted total income is 30 Lakh this satisfies the condition of AMT

So if someone has already adopted a Presumptive scheme then 6 or 8% is the presumptive rate of profit on a turnover then the Presumptive scheme overrides the AMT rule? and AMT rule will be ignored

Why I am asking this as the purpose of AMT is to prevent taxpayers from escaping on tax payments and use all kinds of deductions to reduce tax liability so AMT abides the taxpayer to at least pay 15% or the normal tax computed whichever is more, so if somebody is adopting Presumptive scheme then, in reality, if they are generating profit more than 20 Lakh limit then they abide from AMT rule and at the same time because they have adopted 'Presumptive scheme' so their profit will be considered 6 or 8 % of turnover.

I think that the 'Presumptive scheme overrides the rule of AMT' which means if somebody has adopted 'Presumptive scheme' then the 'Adjusted total income ' for AMT will be considered after the computation of the 'Presumptive scheme' rather before. And so this proves that the 'Presumptive scheme' gets a high precedence over AMT.

Please reply me if my understanding is wrong ? by simply writing 'yes you understood correctly'

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177713 Points)
Replied 31 December 2022

AMT is just minimum tax payable as deposit, it doesn't override sec. 44AD or 44ADA of the act..

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mack (Thinking-to-start-business) (154 Points)
Replied 03 January 2023

Sorry I am using the wrong term 'Override', but what I mean is there could be a situation if turnover is less than 2 Crore (which full fills the eligibility of the Presumptive Scheme) but profit is more than 20 lakh which is eligible for AMT. so in that situation what will be considered. AMT or Presumptive taxation Scheme.

Turnover < 2 Crore

Profit - 30 Lakh as Adjustable profit (with no deductions)

1) If the Normal tax is calculated on 30 Lakh on the normal rate then 6,63,000

2) If the AMT then 4,50,000 (15% of 30Lakh so normal rate tax will be considered as AMT)

3) If followed Presumptive Scheme 0 because 6% of 30 Lakh is non-taxable

So if I choose a presumptive scheme then AMT violates and on top of that there is another thing what if I am generating this income from the special economic zone (10AA)? Dose this means that even if my income will entitle to 100% tax-free but still due to AMT rule I have to Pay ?

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JINAY p Rathod (2 Points)
Replied 17 March 2023

Interestingly the scenario of AMT would only arise if assessee have claimed deduction u/s 35AD dedn u/c 6-A(in respect of certain incomes). Dedn u/s 10AA(SEZ).Because as per 115Jc(Amt provision) if total tax payable before claiming the above dedn and claiming dedn u/s 32 in advent of not claiming dedn u/s 35AD is less than tax payable under regular provision then then assessee is required to pay tax as per AMT provision. But assessee claiming income under presumptive scheme u/s 44AD is not eligible to claim above dedn. So his total Income under both scenario is going to be same so AMT provision nit Applicable. (In order to understand these provision better, you should read bare act of sec 115JC, 44Ad, 35AD).i hope this clears your doubt.