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Section 44AD query

Dhaval (Job) (794 Points)

17 March 2018

I have some queries/doubt relating to presumptive taxation,
1. For calculation of turnover which amount is to be considered, including tax or excluding it..
2. whether 8%/6% rate is applicable on actual turnover or cash receipt
3. in case if the money is received after the end of F.Y then for which year this amount is to be taken
4. while filling itr do we need to show any balance sheet details etc....

kindly reply to my query and also help me out with any file or link where I can get more clarity on this section

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7 Replies

Saifullah Khalid (Autodidact/Curious ) (633 Points)
Replied 17 March 2018

(1) Including vat/GST/Indirect taxes.

(2) Component of gross sales (Vat/GST Included) received in cash will qualify for 8% rate and Component of Gross Sales (Vat/GST Included) received through banking channels(Checks/Drafts/NEFT/RTGS/IMPS etc)/electronic modes will qualify for 6% rate.

(3) This depends on the way of accounting you have adopted since the day you started your bussiness , revenue recgnition can be Accrual/mercantile system based or cash/actual reciept based ...whatever system one opts should remain consistently with that system only for future financial years ... that said, as per recent ICDS rules even presumtive taxation based assesse should follow Accrual/mercantile system only for revenue recognition of the bussiness .

(4) No Balance sheet or P/L account needed when filing under presumptive taxations Schemes .

What else you want to know..? you can post here your specific queries ... experts here in this forum will definitely help you with them ...

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Dhaval (Job) (794 Points)
Replied 17 March 2018

thank you Mr. Saifulla for your reply...
continuing my query in point 3 I have heard that to claim 6% profit.. amount of turnover should be received before filing of tax returns...and if it is true then the amount remaining to be received will be chargeable at 8%.
Another thing I want to Know about section 44AD is that for example a small proprietor has annual turnover of Rs 30 lakhs and he receives money by digital mode..so his total income will be 6% i.e Rs 1.80 lakhs which below exemption limit so he doesn't have to pay tax. But now he knows that his actual profit is more than 1.80 lakhs, say 5 lakhs, then also he can claim 6% as his income..
Regards

Saifullah Khalid (Autodidact/Curious ) (633 Points)
Replied 17 March 2018

Originally posted by : Dhaval
	thank you Mr. Saifulla for your reply...continuing my query in point 3 I have heard that to claim 6% profit.. amount of turnover should be received before filing of tax returns...and if it is true then the amount remaining to be received will be chargeable at 8%.

Yes , your are right ....

Originally posted by : Dhaval
	thank you Mr. Saifulla for your reply...continuing my query in point 3 I have heard that to claim 6% profit.. amount of turnover should be received before filing of tax returns...and if it is true then the amount remaining to be received will be chargeable at 8%.Another thing I want to Know about section 44AD is that for example a small proprietor has annual turnover of Rs 30 lakhs and he receives money by digital mode..so his total income will be 6% i.e Rs 1.80 lakhs which below exemption limit so he doesn't have to pay tax. But now he knows that his actual profit is more than 1.80 lakhs, say 5 lakhs, then also he can claim 6% as his income..Regards

This exact query/question cropps up every now and then here in forum ....so ..in a single statment one answer is " YES its absolutely legal to declare/deem at least 8%/6% (as the case may be) of total gross reciept as the final taxable income when opting special presumtive taxation provisons like 44AD " .

When under these special provisons the key words to remember are "Gross Receipts,Turnover Presumed , Deemed " not the word "Actual Profit "

that said ...don`nt be greedy(no offence) ... yours is lower slab income (just 5%) so Tax burden will not me much on same...so think accordingly ... give back to nation your share of the income what the nation deserves ....... Long Live my country ... Jai Hind ....

Mukesh Kumar (Accounts Manager) (1466 Points)
Replied 18 March 2018

1. For calculation of turnover which amount is to be considered, including tax or excluding it.. (Exluding All taxes)

2. whether 8%/6% rate is applicable on actual turnover or cash receipt ( both difference 8% for cash sale and 6% for digitel sale )

3. in case if the money is received after the end of F.Y then for which year this amount is to be taken (as date invoice book in a/c book )

4. while filling itr do we need to show any balance sheet details etc...(no is follow condition 44 AD and Presumptive ratio , 44 AB,)

Saifullah Khalid (Autodidact/Curious ) (633 Points)
Replied 18 March 2018

Originally posted by : Mukesh Kumar
	1. For calculation of turnover which amount is to be considered, including tax or excluding it.. (Exluding All taxes)

No, the Turnover/Gross Receipts for 44AD purpose should be arrived at after " INCLUDING " GST/VAT .