Section 44ADA is the newly inserted section and it will take effect from 1st April, 2017. It will apply in relation to the assessment year 2017- 2018 and subsequent years.

For whom is the presumptive taxation scheme of section 44ADA designed?

It is designed to give relief to

  • resident small taxpayers AND
  • whose total gross receipts do not exceed fifty lakh rupees in a previous year AND
  • and are engaged in specified professions such as
    • Legal
    • Medical
    • Engineering or architectural
    • Accountancy
    • Technical consultancy
    • Interior decoration
    • Any other profession as notified by CBDT

What is the scheme of 44ADA?

  • In case of a person adopting the provisions of section 44ADA, 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%.
  • The presumptive income computed @ 50% is the final income and no further expenses will be allowed.
  • While computing income as per the provisions of section 44ADA, separate deduction on account of depreciation is not available. However, the written down value of any asset used in such business shall be calculated as if depreciation as per section 32 is claimed and has been actually allowed.
  • A person opting for the presumptive taxation scheme of section 44ADA is also liable to pay advance tax.
  • If a person opts for the provisions of section 44ADA and declares income @50% of the gross receipts, then he is not required to maintain the books of account in respect of specified profession.
  • A person can declare income at lower rate (i.e. less than 50%), however, if he does so, and his income exceeds the maximum amount which is not chargeable to tax, then he is required to maintain the books of account as per the provisions of section 44AA and has to get his accounts audited as per section 44AB.
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