Thanks a lot Shrutika for the advice
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Hi,
My fno trading income is 27L and 92L turnover. Can i file return under presumptive taxation i.e with 6% taxable income
Hi @Kabir_shah
As per section 44AD, any individual, HUF, or Partnership firm (other than LLP), having an annual turnover of up to ₹2 crores, can declare 6% (for digital transactions) of its turnover or actual profits whichever is higher as taxable income.
You can opt for the presumptive taxation scheme. In your case, the FnO turnover (business income) is less than 2cr, and the profit is 6% (₹5,52,000) or actual (₹27,00,000) whichever is higher is the taxable income.
Hope this helps.
Quick question, I’ve paid my advance tax for AY23-24 under 44ADA. Now on the income tax eportal website, when I go to the File Income Tax Return section, I do not get the option to select AY23-24. I just get AY22-23. When will AY23-24 become available? I thought the filing starts from 1st april?
Hi @Vivek_Negi
The Income Tax Portal is not live yet, the utility, schema, is not out yet. It is expected that the filing shall begin soon.
You can wait for sometime.
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Thank you for the wonderful article info. Here is my question:
I work as an independent IT consultant (proprietor) for a foreign company and my income is around 43L with no cash component involved and no other income source.
Below are my approximate Investments & Expenses:-
- Professional expense: 2L
- Rent: 2L
- Chapter VI A deduction: 6L
Am I eligible under 44ADA?
Will I have to pay tax on 33L (43L - 2L - 2L - 6L)?
Will I have to go through tax audit option?
Are there any other options to further save on the above income tax figure?
Hi @Sibasish_Padhy,
Here are the answers to your questions:
- Yes, you are eligible under 44ADA. If you opt out of 44ADA, you have to continue under the same for 5 years. If you opt out of the same, you will not be eligible to opt again for 5 years.
- Yes, you will have to pay tax on ₹33 Lakhs.
- No, since the receipts are less than ₹50 Lakhs, you are not required to undergo audit.
- If you have incurred expenses exclusively for earning the professional income like internet expenses, mobile bills, etc. then it can be claimed and tax liability can be reduced.
Hope this helps!
Thank you for the quick info.
While going through this a bit deep today, I have come across the below section of info:
As stated by many, since my gross receipt is 43L and profits are surely above 50% of the gross receipt, I can straightaway start paying taxes on presumptive income (43L/2 =) 21.5L.
So I request a bit of clarity on whether I will be taxed at 33L or 21.5L…
And if the taxable income is 21.5L, will I further get options of Chapter VI A, rent, internet etc for tax deductions?
Thanks in advance.
Hello @Sibasish_Padhy
As per Section 44ADA of the Income tax act, the higher of the below 2 will be deemed as profit from business & profession :
- 50% of the total gross receipt.
- Actual Profit
Thus, in your case Income tax has to be paid on actual profits i.e 33L. You can claim deductions under Chapter VI A in addition to the above.
Also, since your gross receipts are more than 20 lakhs you need to register for GST if not yet. You can opt for LUT and continue doing export without payment of GST but GST Registration and filings are mandatory in case your gross receipt exceed 20 lakhs in a financial year.
Quicko can help you with GST filings.
Assessee has been showing business income (trading in computer hardware) under section 44AD and filing ITR3 from FY 2015-2016. to FY 2021-2022. In FY 2022-2023 assessee started trading in F&O and incurred a loss of 6.2L. Total TO for both businesses i.e Computer Hardware trading and F&O is less than 1.5Cr. Total income for FY 2022-2023 is less than 2.5L. Can he still opt for 44AD and claim losses? Is tax Audit applicable in his case? If he opts out of 44AD can he opt for 44AD in FY 2023-2024?
Hi @S_M
As per the rule, if a taxpayer opts for the presumptive taxation scheme in a financial year, he/she should opt for it for the next 5 financial years continuously. However, if the taxpayer fails to do so, he/she would not be able to take the benefit of the presumptive taxation scheme for the next 5 financial years.
Yes, he can continue to report business income from computer hardware u/s 44AD and report trading business (FnO) as regular business income by preparing a P/L and Balance Sheet and claim losses.
Thus, losses from FnO business will set off against the profits from the Computer hardware business and the balance loss will be carried forward for future 8 years.
Tax Audit is determined on the basis of 2 criteria:
- Turnover from Business is more than 10 crore.
- Profits from Business are less than 6% of turnover and total income is more than 2.5 lakhs.
For expert assistance with your taxes, you can book a MEET, and connect with a tax expert online.
Hello @CA_Niyati_Mistry , thanks for the post and answers to queries. I have 2 queries
- Regarding interpretation of Section 44ADA
As per your post, for a professional, the taxable income will be 50% of gross revenue or actual profits, whichever is higher. After reading the section and this tutorial and FAQ from Income tax, i am interpreting taxable income as 50% of gross revenue. One can declare more income than 50% of gross revenue. But legally, even if a professional is getting 70% profit, he/she is not bound to declare that. By declaring 50%, s/he is on right side of Income tax law.
Wanted your comment on my interpretation.
- Regarding cash component after 1st April 2023
If a professional is having 15% cash income, but the total income is less than 50L, will s/he be able to get benefit of Section 44ADA?
Hello @dhruv07,
Here are the answers to your queries:
-
As per the law, a professional is required to declare minimum of 50% of the gross revenue as profits.
However, if the actual profits are higher, one can declare such higher profits. -
Yes, the restrictions on 5% cash receipts is applicable only for the enhanced limits of ₹75 Lakhs. Since the gross receipts is less than ₹50 Lakhs, you can take benefit of Section 44ADA even if cash receipts are 15%.
Hope this helps!
Thanks @CA_Niyati_Mistry .
As per your response
However, if the actual profits are higher, one can declare such higher profits.
the word play is between can declare and must declare. One ‘can’ declare more than 50% of gross as income. But as per law, its not ‘must’, as your earlier post is suggesting by saying higher of 50% or actual profit.
Hence, my interpretation is by declaring 50% of gross revenue, irrespective of profit %, i am on right side of the law.
Hello @dhruv07,
By declaring 50% of the gross revenue as profits you are on the right side of the law.
We recommend you to declare the actual profits if they are higher than 50% of the gross receipts.
Hope this helps!
Thanks @CA_Niyati_Mistry . Just trying to learn. What would be the logical reason to declare more than necessary and pay extra tax, esp when paying 50% is lawful? One reason could be to increase the ITR value for using in future to get loans. Other than that, can you pl explain any reason?
Also, since the professional would not be maintaining any books, arriving to exact profit would be even difficult.
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Hey @dhruv07
The liability to prove that actual profits were not more than 50% is on taxpayer in case of scrutiny. Thus, as previously said we recommend to show actual profits in case they are higher than 50%.
Hope this clarifies!
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I have a important question. I am freelance screen writer and in the previous financial year I earned 15.5 lacs for my first screenplay. Rs.1.55 lac was deducted as tds by the producer. Can I apply for refund. I have a health insurance, premium costing Rs. 10000.
If I apply for tds return under presumptive taxation how much return I can expect. I don’t know the calculations. Please help. Can you please let me know the exact amount of tax which I need to pay and exact amount of tax refund I will get.
Furthermore, I had to pay around 80 thousand for travelling to Goa for a meeting.
Under presumptive taxation do I need to produce receipts?
Hello madam, I have a important question. I am a freelance screen writer and in the previous financial year I earned 15.5 lacs by selling my first screenplay. Rs.1.55 lac was deducted as tds by the producer. Can I apply for refund. I have a health insurance whose premium is Rs. 10000.
If I apply for tds return under presumptive taxation how much return I can expect. I don’t know the calculations. Please help. Can you please let me know the exact amount of tax which I need to pay and exact amount of tax refund I will get.
Furthermore, I had to pay around 80 thousand for travelling to Goa for a meeting.
Under presumptive taxation do I need to produce receipts?
I would be really grateful if you can help me.
Yes, you are eligible to opt for the presumptive taxation scheme since your gross receipts are less than 50 lakhs in a financial year.
When you file your return you will be reporting all your income, expenses, deductions, tax credits etc.
If you opt for the regular taxation scheme, you can claim ₹80,000 as your professional expense and hence reduce the amount of taxable income.
If you opt for the presumptive taxation scheme, it is deemed you have claimed all deductions
of expenses. Any further claim of the deduction is not allowed after declaring profit @ 50%.
Also, you are not required to maintain the books of accounts under the presumptive scheme.
Here’s your tax liability based on the information provided above.
| Particulars | Regular (in ₹) | Presumptive (in ₹) |
|---|---|---|
| Business & Profession Income | 15,50,000 | 7,75,000 |
| Less: Expense | 80,000 | - |
| Total Business & Profession Income | 14,70,000 | 7,75,000 |
| Deduction u/s 80D | 10,000 | 10,000 |
| Total Taxable Income | 14,60,000 | 7,65,000 |
| Tax Payable at normal rate | 2,50,500 | 65,500 |
| Add 4% Cess | 10,020 | 2,620 |
| Total tax payable | 2,60,520 | 68,120 |
| Less: TDS dedcuted | (1,55,000) | (1,55,000) |
| Tax Payable/Refund | 1,05,520 | (86,880) |
Hope this helps.
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