PRESUMPTIVE TAXATION

-UNDER INCOME TAX ACT, 1961

SECTION 44AD

• To reduce the burden of compliance of small taxpayers,

the govt provides for a scheme of Presumptive Taxation.

• The small taxpayers are not required to maintain any

books of accounts and their profits are presumed to be a
certain percentage of the Total Sales.
SECTION 44AD
• Section 44AD applies to all businesses except the business of plying, hiring or
leasing goods.
• Section 44AD wont apply in case of Agency Business as well as in case of a
business earning income from Commission or Brokerage.
• Section 44AD only applies in case of Individuals, Partnership & HUF provided
they are Resident in India. This section does not apply in case of Limited
Liability Partnerships.
SECTION 44AD

• Income would be presumed to be 8% of the total turnover of the assessee,

only if the total turnover of the assessee is less than Rs. 2 Crore.
• The govt has also decided to give several incentives to businesses who receive
the payments digitally. One such incentive is that if a business receives
payments digitally, he can claim his Income to be 6% of the total payments
received digitally i.e. through Cheque/ Demand Draft/ Debit Cards/ Credit
Cards/ NEFT/ RTGS or any other Cashless mode, during the previous year or
before the due date specified in sub-section (1) of section 139 in respect of
that previous year.]
SECTION 44AD
• As per the latest amended laws – if a person opts out of the scheme of Presumptive
Taxation of Section 44AD, then he cannot avail the benefit of the scheme of
Presumptive Taxation for the next 5 years.
Particulars Presumptive Taxation for Business
AY 2017-18, 2018-19, AY 2019-20 Opts for Presumptive Taxation
AY 2020-21 Does not opt for Presumptive Taxation
AY 2021-22 to AY 2025-26 Cannot opt for Presumptive Taxation
SECTION 44AD
• Any deduction allowed under provisions of Section 30 to 38 shall, for the
purpose of income computed under this section be deemed to have been
already given full effect and no further deduction shall be allowed under
these sections.

• Advance tax, for taxpayers having opted for the presumptive scheme, is
to be paid by 15th March of the relevant financial year.
SECTION 44ADA

• The benefit of Presumptive Taxation which was earlier available only to

specified businesses has now been extended to Professionals.

• Professionals whose Total Gross Receipts do not exceed more than Rs. 50
Lakhs in a financial year can claim benefit of this Section.

• The Income of any person making use of this Section would be assumed to
be 50% of the Total Gross Receipts for the year.
SECTION 44ADA
• The following are considered as professionals who can make
use of this Section:
1.Legal
2. Medical
3. Engineering
4. Architectural Profession
5. Profession of Accountancy
6. Technical Consultancy
7. Interior Decoration
SECTION 44ADA
• The assessee would also NOT be required to:
1. Maintain books of accounts under sub-section (1) of
Section 44AA, or
2. Get the accounts audited under Section 44AB in
respect of such income.

• Any deduction allowed, for the purpose of income

computed under this section be deemed to have been
already given full effect and no further deduction
shall be allowed under these sections.
SECTION 44ADA
• However, in case the assessee claims that the profits and gains
are lower than 50% – he would be required to prepare Books of
Accounts under Section 44AA, maintain receipts of all expenses
and get his accounts audited by a Chartered Accountant u/s
44AB.

• Unlike Section 44AD for Business, a professional can opt in and

opt out at any time without the 5 year restriction.
WORKING ON WINMAN
1. GO TO HOMEPAGE OF WINMAN>>SELECT 44AD OPTION UNDER PGBP HEAD>>
2. SELECT 44AD/44ADA AS APPLICABLE>>
3. ENTER THE VALUES OF TURNOVER AND PROFIT (IF OTHER THAN 8%/6%)>>
3. INCASE OF 44ADA(PROFESSION) ENTER RECIEPTS AND PROFITS (OTHER THAN
50%)>>
4. ITR INFORMATION(ASSESSEE DETAILS)>>
5. COMPULSORY COMPLIANCE>>

(NOTE: COMPULSORY COMPLIANCE PERIOD IS NOT

APPLICABLE FOR 44ADA. )
6. FINANCIAL INFORMATION TO BE DISCLOSED>>

7. SAVE THE DATA ENTERED , VERIFY AND UPLOAD.

ISSUES
 Treatment of presumptive to normal taxation – deemed
depreciation is allowed u/s 44ad(3) (LINK)
 Treatment of assessee having turnover of rs. 1.5 crore –eligible
for 44AD and is he required to get audit done u/s 44AB?
 Limit on time to receive through specified modes. (LINK)
 Is an audit required in the following case?
Turnover= 50 lakhs.
Profit = 2 lakh (less than 8%)
THANK YOU!

BY: SHRIYA A. SAKHARE

ARTICLE ASST.
KPPM & ASSOCIARTES