What is presumptive taxation scheme? Who can opt for it?

Income Tax Income from Business or Profession
122

Hi,

I’ve been filing my ITR under Section 44ADA using ITR-3 for the past two years, covering:

  1. Income from Capital Gains
  2. Income from Freelance Activities

My situation has recently changed, and I now also have salary income in addition to the above two sources.

Given this change, do I need to file my ITR under a different section? Is there a locking period that prevents me from switching from Section 44ADA now?
Please clarify.

123

Hey @Prateek_Sen,

You can still report your freelancing income under the presumptive taxation scheme. Even if you now have salary income as well, it won’t make a difference in your eligibility to opt for section 44ADA.

124

Hi Surabhi,

So I opted for presumptive taxation for the first time in FY 2020–21, when I started earning from Google AdSense. But in May 2023, my AdSense got demonetized due to circumstances beyond my control. So in FY 2023–24, my business income amounted to only 5% of my total income. 95% of it came from STCG-earned trading stocks.

Which ITR form should I choose to file my returns on this time? And should I opt for presumptive taxation now?

125

Hey @pravink,

If you have income from business, no matter the percentage, you’ll have to file ITR-3. You can still opt for the presumptive taxation scheme. In case you choose to opt out before 5 years, you’ll have to get a tax audit done.

126

If I don’t opt out of presumptive taxation, will it continue forever or only till 5 years?

And why not ITR 4?

127

Hey @pravink,

You mentioned you has STCG as well, and ITR-4 does not contain a section to add capital gains. Hence, you’ll have to go for ITR-3. You’ll be able to declare your business income under presumptive scheme here as well.

Moreover, for businesses, you have to opt for the presumptive scheme for 5 years. If you opt out before that, you’ll have to do a tax audit. If you opt out after 5 years, there’s no such compliance.

128

Thanks Surabhi,

Also, one last query: I am living in a rented house and earning only through STCG. So can I claim my rent payments as tax deductions?

129

Hey @pravink,

There’s a deduction section 80GG for house rest. However, this is not allowed for income from capital gains.

130

Hi,

When I fill F&O trading income under business & doctor consultancy income as profession under 44ADA, quicko is showing to file ITR3… Is this correct ?

As I was thinking that ITR4 must be filed if 44ADA is involved…

Pls reply how to proceed ?

131

As you are also reporting your F&O business which will go as normal business, ITR-3 is being selected. But ITR-3 also has the option to report presumptive business and that is exactly where your doctor consultancy income will be mapped.

132

The Assessment Year (AY) 2023-24 typically becomes available for filing on the Income Tax e-filing portal shortly after the financial year ends on 31st March. However, sometimes there might be a delay in the availability of the new AY due to updates or maintenance on the portal. Here are a few steps you can take:

  1. Check Periodically: The AY 2023-24 should become available shortly after the beginning of the new financial year (1st April). Check the Income Tax e-filing portal regularly for updates. It’s common for the portal to update within the first few weeks of April.
  2. Notifications: Keep an eye on official announcements or notifications from the Income Tax Department regarding the availability of AY 2023-24 for filing. These notifications usually provide clarity on when the portal will start accepting returns for the new assessment year.
  3. Contact Support: If you’re unable to find AY 2023-24 listed for filing after the initial weeks of April, consider contacting the Income Tax Department’s helpline or customer support for guidance. They can provide information on any specific delays or issues affecting the portal.

In most cases, the portal updates promptly for new assessment years, but occasional delays can occur. Checking periodically and staying informed through official channels will help ensure you file your return for AY 2023-24 in a timely manner.

133

@Surbhi_Pal i am using a commercial property as office for my business and my wife is the owner of that property, can i pay rent to my wife and show it as a expense in filling business income under section 44AD? is it legal? i am considering to do online payment of this rent.

134

Hi @Nick00,

While opting for the presumptive taxation scheme, you need to declare a minimum of 6% of turnover as profits. If your net profits (after considering for expenses) are upto 6%, you can claim these.

1 Like
135

Thanks @Surbhi_Pal ,
Is having a rent agreement mandatory in these type of scenarios where one family member is paying rent to the other member?

136

Hi @Nick00,

Yes, ideally you should have a rent agreement even in cases where you are paying rent to a family member.

137

Hi @Surbhi_Pal ,

wouldn’t this be a case of clubbing of income?

138

Sir,
A Doctor Gross receipts fees collection from patients rs:20 lacs and purchase of medicines rs:10 lacs selling to patients
Medicines rs:5 lacs used patients treatment purpose
Question:
A Doctor sec 44ada provision itr filed allowed and purchase of medicines transaction rs:10+5 lacs total rs:15 lacs sec 37 provision business expenses claim allowed in it purpose

139

Hey @Sundaraiah_Kollipara

If an individual is opting for presumptive taxation under section 44ADA then they are not allowed to claim any expenses. Hence, in your case, they will not be able to claim expenses of INR 15 lakhs.

1 Like
140

It assessess maintained a jewellery business and interest income from different persons (money lending business)
Question:
Assessess sec 44ad provision eligibility for it purpose

141

Section 44AD of the Income Tax Act provides that a money lending business is eligible for the scheme if its total turnover or gross receipts in a fiscal year do not exceed 2 crores. Under this scheme, 8% of the total turnover is considered income, simplifying the tax process.