Thanks @Shrutika_Shah for responses.
I will have fixed term 1 year contract with 3rd party which will do only money transactions from $ to INR… this is not employment and looks professional/ technical services to foreign client.
So still i need to go with normal income tax slab or can get advantage of 44ADA?
Thanks
Shrikant
Hi @shrikant_j
It depends on the contract entered by you, whether it says it is salary or contractual payment.
If it is a contractual payment, then you can opt for the presumptive scheme u/s44ADA.
@Shrutika_Shah
Thanks again for reply.
It will b mentioned as monthly payment for this 1 year contract with 10% TDS deduction.
So back to old questions: how to exempt from GST, do i need register for it? Any audit file need to maintain?
Thanks
Hi @shrikant_j
GST will be applicable. Since you are exporting services, you can claim the benefit of LUT.
Audit will not be applicable.
For any further queries, you can also Ask an Expert.
Hi, I have been working as a salaried employee for an Indian company for the first 4 months (Apr - Jul) and have now switched to a foreign client, working as an IT consultant since mid-July. I have approximately 12 lakhs as my salary income, and I assume that by the end of this year, my income from the consultant role would be 35 lakhs. I also invest in the stock markets (short-term) along with F&O. I have some queries that I need clarification on:
It would be greatly appreciated if you could please guide me on this.
Hi @Yash_123
Here are answers to your questions:
Taxable income is your adjusted gross income less any deductions. Hence, for FY 2023-24 if you say you would earn 35 lakhs, then you would be required to pay tax on 35 lakhs less any deductions.
Since you have been trading in F&O which is a non-speculative business income, you will be required to file ITR 3. Yes, you will be able to claim the standard deduction of ₹50,000 on your salary income.
If your tax liability exceeds ₹10,000, you will be required to pay advance tax in 4 installments. Yes, advance tax means you estimate your annual income and calculate and pay advance tax accordingly.
You can opt for the presumptive scheme only if you have income from Business/Profession. So, in that case it depends on the contract between your employer and you, as to you being receiving salary income or professional income. In case it is received as professional income, you can opt for the presumptive scheme and you can pay the advance tax in 1 installment also by 15 March 2024.
You can claim only those expenses that have been incurred for the purpose of your business (F&O) or profession. Read about the Expenses a Trader Can Claim in ITR - Learn by Quicko.
If you opt for the presumptive scheme, all deductions for business/profession expenses are deemed to have been allowed. Once profits are taxed at 50% of the gross receipts, the balance 50% is deemed to be allowed towards all the expenses.
Here’s a read on Income from Business and Profession - Guide - Learn by Quicko
Please read about the deductions not available in the new tax regime here.
It depends on your financial situation. You can Read about the ways to save taxes! and accordingly, pay the tax.
You can also Ask an Expert for any further guidance.
Hope this helps.
Thanks, @Shrutika_Shah , for the detailed responses. Just some follow-ups on the second answer:
Hi @Yash_123
Yes, you can consider the same as your professional income and file ITR 3 opting for the presumptive scheme. You can also verify the same if your TDS is being deducted u/s 194J.
No, there is no disadvantage as such. As per the law, if you opt for the presumptive scheme you can pay the advance tax in one go before 15th March of the FY.
Hope this clarifies.
Thanks @Shrutika_Shah for the clarifications. I would really appreciate if you could also help me with the following queries as well 
Hi @Yash_123
No, there is no such requirement of any license to opt for the presumptive scheme. The presumptive scheme is for small businesses and professions.
Also, you may receive the consultant fee in any account, in order to qualify for a business or profession income. It all depends on the relationship between you and the other party, if its an employee and employer, it will be a salary income and will not be able to qualify for the presumptive scheme.
Hope this clarifies!
Thanks for all the responses, however while summarising all the above points as well as by going over some other threads, I actually get confused, please help with these queries:
Suppose in a hypothetical scenario if someone’s income from consultant job would be around 40 lakhs, income from salary - 25lakhs, income from capital gains - 10lakhs, other income - 2lakhs, then could he still able to opt for presumptive scheme, given the total income is 77 lakhs while income from profession is 40 lakhs which is less than the limit for 44ADA, i.e. 50 lakhs?
Suppose if he can able to opt for 44ADA and being working with the foreign client he is getting the entire amount without any TDS deduction, so if the actual expenses for him is roughly 2lakhs only, so should he still show his income as 20 lakhs (50% of 40lakhs) or he must have to show 38 lakhs as his professional income and pay tax on that? If he need to pay tax on 38lakhs then what is the point of having Section 44ADA into existence which states that he don’t need to maintain the records?
Suppose in case he has 2lakhs as expenses and can artificially spend rest 15lakhs for buying car, property and treat them as working place as it’s still WFH for him, then could that be counted as expenses? (total expense then - 17lakhs)
The main point I’m trying to understand from the above questions is - What’s the point of not maintaining the records if I still need to show more than 50% profits and I’m unable to take any benefit? Please refer to the text from this blog itself
Tax Audit and Books of Accounts for Presumptive Income under Section 44ADA
- Books of Accounts under Sec 44AA – If a taxpayer opts for a presumptive taxation scheme u/s 44ADA and reports income at 50% or more of the gross receipts, he/she is not required to maintain books of accounts as per Sec 44AA.
Please help me clarify all the above points, there are lots of threads, blogs with diverging views and also different CAs have different opinions. Would highly appreciate your detailed response.
Hi @Yash_123
Please read the answer below.
Yes, in this hypothetical situation of a person having annual gross receipts from a profession under ₹50 lakhs can opt for the presumptive, including having income from salary, CG & IFOS.
However, if the total income in an FY exceeds 50 lakhs, the person is required to file a Schedule AL.
Presumptive scheme has been introduced for small businesses and professionals to reduce the compliance burden of maintaining the books. In case the actual profit is available with you and you opt for the presumptive scheme for a profession, then as per the rule, you must record 50% or more (if the actual is higher) of the gross receipts as income and pay tax on the same.
In case you do not have the books of accounts, you can pay tax on 50% of your income.
But, keep in mind, if you opt for the presumptive scheme, you must opt for the same for the next 5 years.
If you know the actual expenses, you must declare the same and pay tax on the remaining income.
The presumptive scheme u/s 44ADA is meant for small professionals to give them relief from the tedious job of maintaining books of accounts and getting the books of accounts audited.
Yes, Presumptive taxation applies if professional income is less than 50 Lakhs( even after combining with salary ,income exceeds Rs 50 Lakhs)
Professional receipt is independent of other income such as salary, interest etc.
ITR 4 is required to be filed.
A small clarification is requested.
Whether Sec 44AD(6) is also applicable for professionals under section 44ADA ( to continue in presumptive for subsequent 5 years of opt in ) .
Regards & Thanks in Advance
Hello @anitabhadra,
As per section 44AD(4), a person opting into presumptive taxation scheme has to continue the same for subsequent 5 years.
There is no such condition under section 44ADA for professionals.
Hope this clarifies!
Hi,
I am a fulltime regular profit making F & O trader since 7 years. I have no other income. I am posting here to clarify whether i am in the right path. Since FY 2021-2022, I am filing under presumptive taxation. I take the help of nearby CA for tax filing. Prior FY 2021-2022 I filed under regular business. In the middle of that financial year, I have closed my trading and demat account with a broker, and I had only the profit and loss statement excel and since the account is closed with the broker, i don’t have access to ledger statement of the broker. I contacted the broker, but they said since the account is closed, they cant do anything. I contacted CA and he said since the ledger is not available, i can opt for presumptive taxation and i don’t need to keep book of accounts and filed tax under presumptive taxation, my turnover was around 65 lakhs and gross profit was around 12 lakhs, and after deducting brokerage and other expenses, the profit came around 10 lakh and i paid taxes for 10 lakh income. For FY 2022-2023 i did the same for income of 11.5 lakhs and my return was processed. I am showing profits well above the 6 or 8% threshold, may be around 18 to 20%. i have interpreted 44AD profits as whichever is higher, so i have shown real profits.
My queries are
Q1. I saw in some of the posts in this forum, deductions are not allowed in 44AD, in that case do i have to show my gross profit without deducting my brokerage and other expenses like internet and telephone bills?
Q2. my CA quoted there was an advantage with 44AD that i can pay advance tax around by march 15, by which I can come to a conclusion, how much my income will be there for the current FY. In f&o trading, incomes are not consistent, for 3 qtrs. i may be in loss and in 4th qtr. i may be in heavy profits. This makes me pay advance tax with penalties if not opted for 44AD. for FY 2019-20 i had huge profits for the first 3 qtrs, i paid advance tax around 2 lakhs. 4th qtr was a disaster and i ended up with no tax liability. i had to wait around 1 year to get my refund, which was huge. already loss in 4th qtr and with 2 lakh dues to come, it was difficult for me to manage finances. So i was attracted to the method of advance tax in section 44AD. So is the advantage of advance tax without penalty true in 44AD?.
Q3. Apart from the broker related expenses, I incur additional expenses like attending traders meet or some kind or seminar at least twice in a year [digital transaction] . I have rented a small room situated in upstairs of a known person’s house, to work in it as a office by paying 5k per month including electricity expenses [cash transaction]. This was paid in cash. As the amount is less, the houseowner demands it to be given in cash. both the other expenses mentioned above, i.e. digital transaction not reflected in broker’s profit loss statement of around 30 to 40K and cash transaction of 60K [ no receipt] was deducted from the gross income and filed. Is this allowed ? My CA clarifies not to worry if rent receipt is not there , in 44AD as these are minor expenses.
will be happy and thankful to see my queries answered.
Hey @STS19,
What you have mentioned is correct, section 44AD is for individuals whose turnover is up to 2 crores and they have not maintained any books of accounts. With regard to your query,
As per section 44AD since books of accounts are not maintained, one can not determine their business expenses. Hence while filing the ITR you just have to report your gross turnover/ receipts and actual net profit excluding all actual expenses incurred (subject to a minimum of 6% of your turnover as all transactions are digital). In the case of trading income, the financials can be maintained conveniently and hence actual profits can be reported under regular business income.
Note: If you opt out of the presumptive taxation scheme, you will be required to get a tax audit done and you will not be able to opt into the scheme for the succeeding five FYs.
Yes, 100% of advance tax can be paid until 15th March if you opt for the presumptive taxation scheme and there will be no penalty levied on the same.
If you report income as per 44AD then in the ITR you don’t have to give a breakup for your expenses and hence you can enter the actual profits after reducing expenses. However, if you maintain regular books of accounts then you have to give a breakup of expenses and in case any scrutiny arises, the onus will be on you to provide proof to the ITD relating to such transactions.
Hello @CA_Niyati_Mistry @Shrutika_Shah
Thanks for this knowledgeable article.
I am a doctor and I have done a blunder. I need your help.
For FY-2022-23, I had worked for 4 months on salary income of Rs.110000 per month and my past employer deducted TDS under section 192.
For next 8 months, I had worked on monthly remuneration of Rs.125000 p.m. and my employer had deducted TDS under section 194 J which is professional fees paid to me and not salary.
I had mistakenly considered my total income as salary income only and ended up filing ITR 1 and paid more taxes of around Rs. 85000 after claiming refund of only Rs.13000.
Only when I checked my AIS recently, I came to know that the income paid to me for 8 months @ 125000 p.m. by my second employer is actually professional fees and not salary income. I could have easily declared that income under section 44ADA and paid very less taxes on 50% of receipts as per presumptive taxation scheme.
But, now the AY 2023-24 has ended and I cannot revise my return. I can only file an updated return ITR U and that too will give me no refunds,
What should I do now?
How can I get my refunds or at least adjust/carry forward that extra taxes paid in AY 23-24?
Should I now file an ITR U for changing my previously filed ITR 1 to correct ITR 4?
or should I do nothing now?
Please guide.
Thanks in advance.
Hey @Dr.Sagar_Khanna,
ITR-U can be filed only in cases where you are reporting any additional income and not in cases where your actual tax liability is decreasing. Hence, in this case, you will not be able to file an updated return.