If a person has below sources of income.
a) Income from software consultancy (under 20 lakhs).
b) Income from Derivatives trading (turnover of about 9cr and a loss of 2 lakhs).
Can they claim presumptive taxation under section 44ADA for software consultancy?
Yes, Individual can opt for presumptive scheme for software consultancy provided total receipts in the financial year from the consultancy business does not exceed INR 50 lakhs. He can show derivatives trading under normal scheme and prepare books of accounts for that and file ITR 3. ITR 3 allows to show one business under presumptive scheme and another in normal scheme.
Hope this helps.
Hello,
I paid tax under 44ADA as I worked for UK based IT firm as software consultant for last 4 years.
Iâm an individual working from home in India. My total salary was less than 50lakh all these years.
Now, My salary goes beyond 50lakh and I canât use 44ADA hereafter. I learned that 44AD is for business with limit upto 2Cr, should I form proprietorship and make use of 44AD? I can hire few other developers to help me with development and documentation. Thanks for any help.
Hey @kamal
1) You cannot opt for 44AD
Section 44ADA has prescribed a list of eligible professions who can opt for this section. This includes technical consultancy too. Based on the nature of the service that you provide, it can be classified as a technical consultancy and thus if you want to opt for presumptive taxation scheme, you must opt for Section 44ADA. Further, as per Section 44AD, a person who is engaged in any profession as prescribed under section 44AA(1) cannot adopt the presumptive taxation scheme of section 44AD. The prescribed profession under Section 44AA(1) also includes âtechnical consultancyâ.
2) You can opt for Section 44AD
Section 44AD has a list of business codes under which you can report your income from business. These list of codes also includes businesses such as software development, other software consultancy, data processing, other IT enabled services, etc. If your nature of services fall under any of these business codes, you can opt for Section 44AD.
Recommendation:
Both the sections when read together do not provide much clarity. You can either opt for Section 44AD or start maintaining books of accounts since you have crossed the threshold of Section 44ADA.
However, if you choose to opt for Section 44AD, there are chances that it might be questioned by the Assessing Officer (AO). If youâre able to justify to him, you can continue claiming the benefit of Section 44AD based on your turnover.
Hi Sakshi and CA Team, A person has a gross reciepts of 20lakh through consulting to foreign client and the amount is coming to bank account directly (digital transaction). His expense is Rs 3 lakh from bank account and now for the year his earning is 17 lakh (profit) which is there in bank account only. He is following 44ADA and no books maintained. So now as per you, the person needs to pay tax on only 10lakh ie Tax is to be be paid on 50% of gross receipts of Rs20lakh which is Rs10lakh and tax is not on Rs 17lakh ?
That is what you are saying through your last comment.
Hello @AmDang
Section 44ADA mentions declaring income as 'â50% of the gross receipts or a sum higher claimed to have been earned by the assesseeâ. Thus, if you have gross receipts of 20 lacs and youâre opting for Section 44ADA, you must report higher of 50% of gross receipts or actual income earned. Interpreting the section, we have mentioned in our last comment, declaring atleast 50% of gross receipts as income.
Thanks Sakshi.
You did not mention âmustâ in the previous response and that is why I raised the question again as why âcanâ and why not it is a âmustâ. It is mentioned in Tax article that tax payee can voluntarily declare higher income. Thats what raised concern to me as Why it is âvoluntarilyâ and why not âmustâ. Only in ITR form it is mentioned âwhatever is higherâ . I am not a CA and it is not easy for me to interpret what is mentioned.
Thanks for the confirmation. Some CA still not clear on this as they recommend 50% of gross receipts (irrespective of profits) as taxable.
Hello @AmDang
Based on different interpretations, taxpayers declare presumptive taxation income u/s 44ADA differently in the ITR. As per our advice, the taxpayer should declare 50% of gross receipts or actual income whichever is higher as a taxable income in the ITR. This would save them from chances of any future tax notice.
Do I need to pay advance tax if I opt for the Presumptive Taxation Scheme under Section 44AD?
Hey @nachiketa ,
Yes. If the total tax liability for a financial year exceeds INR 10,000, you must pay advance tax. If you have opted for a presumptive taxation scheme u/s 44AD or 44ADA, you are required to pay advance tax on or before 15th March instead of 4 installments in other cases. However, if you fail to pay advance tax by 15th March of the financial year, interest is Sec 234B and Sec 234C is required to be paid.
Hope this helps 
Hello,
So if I am opting for 44ADA, but I also have intraday trading income and STCG, can I still pay advance tax in March, or do I need to pay in 4 quarterly installments?
sec 44ada professional income it return filed assess cash on hand balance large amount show in books as on dt: 31-03-21.my doubt cash on hand balance at the ending of finicial year 31st march any limit prescribed any provision under it act.
As per the Income Tax Act, there is no maximum limit for the amount of cash a person can have at his disposal. Therefore, there are no such restrictions for Cash in hand as long as you have a valid explanation (that is acceptable to IT dept.) of your cash holdings, i.e to explain the source of income.
Thanks reply
Business assess cash in hand limit (ex:10 or 5 or 15 lacs)
Professional assess cash in hand hold limit at the end of finicial year (ex:2 or 4 or 6 lacs) prescribed in it act
Can 44AD be applied for speculative business (intraday gains)?
Thank you!
Hey Nachiketa,
Yes. Section 44AD can be opted for any business income including speculative income (equity intraday trading).
Hope this helps 
Can I opt out of the presumptive scheme if I feel it does not work well for me?
Hey Shachi,
Once you opt for this scheme, you must follow it for the next 5 years. Opting out of it for any 1 year during these 5 years will make you ineligible to again opt for it the 5 years immediately following the year when you opted out of it.
Hope this helps
My total income for FY 2020-2021 is zero. However, I have an F&O trading loss (Business Loss) of Rs 2,36,168 with sales turnover of Rs 11 crore and also, I have intraday trading loss (Speculation loss) of Rs 3,85,295. Do I need to get my income tax audited?