sagar (CA Final) (379 Points)
07 July 2009Is there any Change in 44 AA? I mean there is budget that if turnover is exceeding Rs.40,00,000/- an assessee is required to keep books of accounts.
Will it lead to taxation on presumptive basis? Assessee will naturally not show books of accounts and get taxed on presumptive Income.
Need a detailed clarification
Prabeer
(B. COM (H) CA & CS Final)
(5484 Points)
Replied 07 July 2009
Dear Mr. sagar, please go through the following:
Special provision for computing profits and gains of business on presumptive basis
The existing provisions of the Income-tax Act, provide for taxation of income on presumptive basis in the case of construction
business, income from goods carriages and business of retail trade.
Section 44AD prescribes a method of presumptive taxation for assessees engaged in the business of civil construction
or supply of labour for civil construction in which a sum equal to eight percent of the gross receipts is deemed to be the profits
and gains from business. Section 44AE provides presumptive provisions for the assessees engaged in the business of plying,
hiring or leasing upto ten goods carriages in which a prescribed sum per vehicle is deemed to be the presumptive income of
the assessee. Section 44AF prescribes a method of presumptive taxation for retail trade, under which the presumptive income
is computed at the rate of a sum equal to five per cent of the total turnover.
There has been a substantial increase in small businesses with the growth of transport and communication and general
growth of the economy. A large number of businesses and service providers in rural and urban areas who earn substantial income
are outside the tax-net. Introduction of presumptive tax provisions in respect of small businesses would help a number of small
businesses to comply with the taxation provisions without consuming their time and resources. A presumptive income scheme
for small taxpayers lowers the compliance cost for such taxpayers and also reduces the administrative burden on the tax
machinery.
In view of the above, it is proposed to expand the scope of presumptive taxation to all businesses by substituting a new section
44AD. The salient features of the proposed presumptive taxation scheme are as under:
(a) The scheme shall be applicable to individuals, HUFs and partnership firms excluding Limited liability partnership
firms. It shall also not be applicable to an assessee who is availing deductions under sections 10A, 10AA, 10B, 10BA
or deduction under any provisions of Chapter VIA under the heading “C.—Deductions in respect of certain incomes” in
the relevant assessment year.
(b) The scheme is applicable for any business (excluding a business already covered under Sec. 44AE) which has a
maximum gross turnover /gross receipts of 40 lakhs.
(c) The presumptive rate of income is prescribed at 8% of gross turnover /gross receipts.
(d) An assessee opting for the above scheme shall be exempted from payment of advance tax related to such business
under the current provisions of the Income-tax Act.
(e) An assessee opting for the above scheme shall be exempted from maintenance of books of accounts related to such
business as required under section 44AA of the Income-tax Act.
(g) An assessee with turnover below Rs 40 lakhs, who shows an income below the presumptive rate prescribed under
these provisions, will, in case his total income exceeds the taxable limit, be required to maintain books of accounts
and also get them audited.
(h) The existing section 44AF is proposed to be made inoperative for the assessment year beginning on or after 1st day
of April, 2011.
The proposed amendment will take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year
2011-12 and subsequent years. [Clauses 18,19,20,21,22]
sagar
(CA Final)
(379 Points)
Replied 07 July 2009
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