Sec 44AD:- Income Of Any Business Presumed To Be 8 %
- Applicability:- Eligible Assessee : Resident Individual/HUF/Partnership Firm
- Eligible Business:- All types of business except business covered u/s 44AE/Agency/Commission/Brokerage.
- Turnover does not exceed Rs 1 Crore in Previous Year( 2 CRORES FROM FY 16-17).If all above conditions are satisfied then assessee can declare estimated income from business:- 8% of total turnover or more.
- Non Applicability:-
- Non Resident:-Individual/HUF/Partnership firm.
- Company/LLP/BOI /AOP.
- Turnover exceeds Rs 1 Crore in Previous Year.
- Professional
- Assessee has not claimed deductions u/s 10A/10AA/10B/10BA/80HH/80RRB in relevant previous year.
- If Assessee opts for Sec 44AD and declares his income as 8 % of total turnover or more he should consider following points:-
- Not allowed to claim any expenses or depreciation i.e. expenses covered u/s 30 to 38.
- Remuneration or Interest paid to partner u/s 40(b) shall be allowed as deduction.
- Maintenance of books of accounts u/s 44AA and Audit u/s 44AB not required.
- Advance Tax rule does not apply.
- If there is disallowance of any expenses it will be assumed that it has been already made in calculation of estimated profit.
- Applicability of Sec 44AA & 44AB:-
- Claim lower profit than limit specified u/s 44AD
- Total Income exceeds basic exemption limit.
If assessee claim lower profit but his total income is lower than exemption limit then Sec 44AA & 44AB does not apply.
Example:
1.Assessee has two Business
| Retail | + | Wholesale | |||
| 80 Lakh | + | 30 Lakh |
Sec 44AA : Applicable ( Retail and Wholesale both )
Sec 44AB : Applicable ( since total turnover exceeds 1 Cr.)
Sec 44AD : No relevance
2.Assessee has Business & Profession
| a) | Business | + | Profession | ||
| 80 Lakh | + | 30 Lakh |
Sec 44AA : Applicable ( Business and Profession both )
Sec 44AB : Applicable on Profession (Assessee may opt for Sec 44AD for Business
turnover and 44AB may not be applicable)
Sec 44AD : Assessee may opt for Sec 44AD for Business ( Profession not covered u/s 44AD)
| b) | Business | + | Profession | ||
| 70 Lakh | + | 15 Lakh |
Sec 44AA : Applicable ( Business and Profession both )
Sec 44AB : Not applicable (Turnover is less than Rs 1 crore in business and less than Rs.25 turnover and 44AB may not be applicable)
Sec 44AD : Assessee may opt for Sec 44AD for Business ( Profession not covered u/s 44AD)
3.Assessee has three Business
| a) | Retail | + | 44AE | + | 44AD |
| 80 Lakh | + | 30 Lakh | + | 35 Lakh |
Sec 44AA : Applicable only on retail business.
Sec 44AB : Applicable on Retail ( Rs. 80 Lakhs) since 44AD is not applicable on retail.
Sec 44AD : Applicable on 35 Lakhs
Note: In 3(a), it has been assumed that the assessee has profitability below 8% on turnover of Rs. 80 Lacs.
