Presumptive Taxation u/s 44AD and 44ADA

Income Tax Income from Business or Profession
37

Hey Nachiketa,

Yes. Section 44AD can be opted for any business income including speculative income (equity intraday trading).

Hope this helps :slightly_smiling_face:

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38

Can I opt out of the presumptive scheme if I feel it does not work well for me?

39

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 :slight_smile:

40

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?

41

Hi @b500

Since your Turnover exceeds 10 crores tax audit under Sec 44AB(a) is applicable irrespective of the profit or loss.

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42

2 posts were merged into an existing topic: Applicability of Tax Audit in India

43

My earn money as a freelancer and use 44ADA. My expenses (personal+business combined) are around 20% of what I earn. So I save 80% money.

Some CA says I can just use 44ADA, while others tell me not to use it since my expenses are very little. If I can’t use 44ADA, what’s the point of it?

How to use 44ADA while avoiding any potential trouble?

44

Hello @ProfessionalLo,

Section 44ADA provides a presumptive taxation scheme for professionals where 50% of your gross receipts from profession are treated as your income. The section can be opted only if you have gross receipts up to Rs 50 Lakhs in previous year. Further, you are not allowed to claim as deduction any of the business expenses which you incurred.

However, if you do not opt for 44ADA, you would be taxed as per the normal provisions of Income Tax Act 1961 and would be allowed to claim for deduction of all expenses related to your profession.

You can make an assessment in both the scenarios and opt for one which is the most beneficial to you. Following is the link to the complete guide of Section 44ADA of Income Tax Act, 1961.

Hope it helps!

45

I have opted for a presumptive taxation scheme. Can I claim any further expenses from my gross income?

46

Hey Shachi,

Since you have declared the prescribed percentage of your gross receipts or turnover as income, you cannot claim any other expenses as a deduction.

Hope this helps.

47

I am a software consultant and fill ITR 4 under presumptive profession (Section 44 ADA). Last year also I used the same section to file ITR. I also have a valid GST number. This year apart from my professional income, I also have some Short term capital gains from sale of equity shares and intraday trading losses in equity shares. Please resolve below queries:-

  1. How and where to declare Intraday losses in equity shares in my ITR while filing under Sec 44 ADA. Is it mandatory to declare these losses while filing ITR? My turnover from intraday trading is very nominal less than 1 lac Rs (Absolute profit= Profit + loss on intraday trading). If I don’t want to carry forward losses can I ignore them and not declare at all?
  2. Is there any risk in ignoring intraday trading loss them altogether? As per my understanding 1 lac is a small amount only and i don’t want to carry forward the losses.
48

Hey,

To report your presumptive income from software consultancy, STCG from sale of equity shares and loss from intraday trading, you need to file ITR-3.

  1. Report Intraday Loss in Schedule P&L (point. 65). If the losses are negligible, you may not report them on the basis that you dont want to claim and carry forward the losses.

  2. If the total income is more than basic exemption limit of INR 2.5 lacs and you want to claim the loss, tax audit under Section 44AB is mandatory.

Check out our determine tax audit tool :slight_smile:

49

Is there a provision that FNO traders cannot opt for presumptive taxation scheme? If I have a few FNO transactions and incurred a loss, do I need Tax audit ? And what if I opt for presumptive taxation scheme and show a 8% profit as per section 44AD audit does not apply.

50

Hi @Kiara,

An F&O Trader can opt for Presumptive Taxation Scheme under Section 44AD. You cannot avail the benefit of Section 44AD if you are a Non-Resident in the financial year. Read more about Section 44AD - Presumptive Taxation for Business on our Learn Center.

Hope this helps :slightly_smiling_face:

51

I am working as a software professional with salary of 5Lakhs per annum and I am doing a freelancing job which also fetching me 5 Lakhs per annum(profit is more than 50%). Will I be able to take the benefit of 44AD?
What will be I total Taxable Income?
Do I need to maintain a book of accounts?
Is it legal or illegal to take benefit if I have both salary and professional income?

Thanks
Vignesh

52

Hey @Vignesh054 ,

To opt for Presumptive Taxation Scheme under Section 44ADA, the following two conditions should be satisfied:

  1. The gross receipts of the profession should be less than or equal to INR 50 lacs.
  2. The taxpayer should report 50% or more of the gross receipts as income in the ITR.

Hence, you can take the benefit of 44ADA for professional freelancing income and don’t need to maintain books of accounts.

Further, there’s no harm to take benefit and both salary & professional income has to be reported in ITR.

Here, you can read below article for more insights about presumptive taxation and calculation of taxable income:

I hope, this helps :slightly_smiling_face:

1 Like
53

Thank you so much.
Thanks
Vignesh

54

Does business particulars need to be accurate for presumptive taxation? Why IT Department asks for it and what does it concludes from that?

55

@Divya_Singhvi @TeamQuicko

56

@Kaushal_Soni @Saad_C @Divya_Singhvi @Laxmi_Navlani @AkashJhaveri can you help with this please?

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