Varied opinions on this thread made me relook at the 44ADA law and the 44ADA FAQ.
- The law says: "...a sum equal to fifty per cent of the total gross receipts of the assessee in the previous year on account of such profession or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the assessee, shall be deemed to be the profits and gains of such profession chargeable to tax...".
- The FAQ says: "income will be computed on presumptive basis, i.e. @ 50% of the total gross receipts of the profession. However such person can declare income higher than 50%. In other words, in case of a person adopting the provisions of section 44ADA, income will not be computed in normal manner but will be computed @ 50% of the gross receipts."
Does it mean that there is nothing wrong if a person opting for 44ADA declares income at 50% even if their actual deductible expenses were 10%? Is the spirit of the 44ADA law about reducing the freelancer's burden of maintaining books of accounts, and simply allowing people to declare income at 50%?
Or, does it mean that they are actually supposed to maintain accounts to whatever extent possible, and if their actual deductible expenses are 10%, then they should declare their income as 90% of the gross receipts?
Or, is the provision to ease the burden on the Assessing Officer (AO)? Is the AO required to cross-verify the actual expenses and income of people who use 44ADA?
What is the truth of the matter?
CAclubindia
