After section 44AD of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2017, namely:—

 

Section 44ADA, w.e.f 01st April 2017Summary
(1)

Notwithstanding anything contained in sections 28 to 43C, in the case of an assessee, being a resident in India, who is engaged in a profession referred to in sub-section (1) of section 44AA and whose total gross receipts do not exceed fifty lakh rupees in a previous year, 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 under the head “Profits and gains of business or profession”.

Earlier Section 44AD was not applicable on assessees who were engaged in a profession. But now with insertion of section 44ADA professional can also declare income on presumptive basis provided :

  • Gross receipt during the  Previous year do not exceeds Rs 50Lacs

and

  • Atleast 50% of the Gross receipt is declared as Deemed Profit by the assessee
(2)

Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed.

  • No Deduction for expenses (covered under section 30 to 38) from above declared income will be allowed to assessee if he opt for this section
(3)

The written down value of any asset used for the purposes of profession shall be deemed to have been calculated as if the assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.

  • WDV value of asset used for profession should be taken after allowing notional depreciation.
(4)

Notwithstanding anything contained in the foregoing provisions of this section, an assessee who claims that his profits and gains from the profession are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (1) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.’.

Where Assessee

  • Declares profit from profession less than 50% of Gross Receipts

and

  • Total Income exceeds the maximum amount not chargeable to Tax i.e Exemption Limit.

Assessee is compulsory required to :

  • Maintain books of accounts and other records as per section 44AA(1)
  • Get the above Audited as per section 44AB.

An eligible assessee in respect of an eligible business referred to in section 44AD, to the extent of the whole amount of such advance tax during each financial year on or before the 15th March:

Whole amount of Advance Tax should be deposited on or before 15th March.

 

 

 

It is also proposed that where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five consecutive assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1).

 

For example:

An eligible assessee claims to be taxed on presumptive basis under section 44AD for Assessment Year 2017-18 and offers income of Rs. 8 lakh on the turnover of Rs. 1 crore

For Assessment Year 2018-19 and Assessment Year 2019-20 also he offers income in accordance with the provisions of section 44AD. However, for Assessment Year 2020-21, he offers income of Rs.4 lakh on turnover of Rs. 1 crore. In this case since he has not offered income in accordance with the provisions of section 44AD for five consecutive assessment years, after Assessment Year 2017-18, he will not be eligible to claim the benefit of section 44AD for next five assessment years i.e. from Assessment Year 2021-22 to 2025-26.

 

Situation for Professionals after amendment

(referred to in sub-section (1) of section 44AA such as legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette)

 

GROSS RECIEPTSPROFITSECTION 44ADSECTION 44AB TAX AUDIT

REMARKS

1More than 50 LacMore than 50% of Gross ReceiptsNot ApplicableApplicable

Maintain books and other documents mentioned in section 44AA(1) and get them audited as per section 44AB

2More than 50 LacLess than 50% of Gross ReceiptsNot ApplicableApplicable

Maintain books and other documents mentioned in section 44AA(1) and get them audited as per section 44AB

350 Lac or LessMore than 50% of Gross Receipts

 

 

ApplicableNot applicableAssessee can opt for section 44ADA
450 Lac or LessLess than of Gross Receipts 50%

 

and

 

Total Income = Not Taxable

Not ApplicableNot ApplicableBoth sections 44ADA and 44AB are not applicable.

Maintain books and other documents mentioned in section 44AA (1) no requirement of TAX AUDIT.

550 Lac or LessLess than 50% of Gross Receipts

and

Total Income = Taxable

 

As per Section 44ADA Tax audit is required under section 44ABAs per Section 44ADA Tax audit is required under section 44AB

Maintain books and other documents mentioned in section 44AA(1) and get them audited as per section 44AB

 

Amendmend in Section 44AD by UNION BUDGET 2016

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