sir, Assessee is in retail trade with turnover of Rs.200 lakhs. It is 100% cash business and deposits cash from sales into the bank. He offers 8% of turnover as income ( Rs. 16 lakhs) u/s 44AD of the Act. In the bank account there is closing balance of Rs.60 lakhs . The assessee uses the Rs.45 lakhs to purchase a plot of land.
The assessee opines that since he has offered 8% as income as required u/s 44AD the IT department cannot question the excess money of Rs.44 lakhs (60 – 16) standing in bank account and free to utilise to purchase the plot of land . Is the stand of the assessee correct?. What are the implications ?
If you are opting for section 44AD, you can declare a fixed percentage of your turnover as profit. It is assumed that the assessee is unable to maintain proper books of accounts and hence has opted for 44AD.
However, in case a scrutiny arises you should be able to justify the source of these funds.
I absolutely concur with the write up. AO can not ask for books of accounts ( presumed as not maintained , nor obligated by law) ,nor increase taxable income beyond 6%/8%, if turnover declared is justified by the assessee. I.tax deptt reaching upto ITAT on a clear law matter tantamounts to harassment.
I have new question, i am going to have fixed term 1 year contract with 3rd party where i will get the $ pay in local $ account bank on monthly basic, however i will be working from india.
This is not employment and seems to be professional/ technical services to foreign client.
Can you please advice what the best ITR to be used to save more tax ?can get advantage of 44ADA?
The presumptive taxation scheme allows small taxpayers to declare income at a prescribed rate without maintaining detailed books of accounts.
It can be opted by eligible businesses with turnover up to ₹2 crore and professionals with gross receipts up to ₹50 lakh.
Yes, you can opt for Section 44ADA if you’re providing professional services to clients outside India, and the appropriate form to file under this presumptive taxation scheme is ITR‑4.
The presumptive taxation scheme lets eligible small businesses and professionals declare income at a fixed percentage of turnover, simplifying tax without detailed accounts. Resident individuals, HUFs or partnerships below the specified turnover/receipt limits can opt under Sections 44AD/44ADA.
Hi, for AY 2026-27 ITR-4: Can I opt Section 44AD (6% digital, code 09028) on ₹1.72 Cr Zerodha F&O futures turnover (absolute P/L, 100% digital bank receipts, ~₹1.17 Cr actual profit)?
Confirm presumed ₹10.3L income = ₹0 tax (new regime +87A), ₹15L advance tax refund, no audit/books needed (<₹3 Cr), required uploads (contract notes/P&L/bank stmts), and any scrutiny risk notes for high GP ratio? Thanks!"
Yes, presumptive taxation scheme can be opted. As regards the chances of scrutiny, there are no defined rules regarding when the scrutiny can come, it depends on case to case and the stance that AO takes.
Small businesses and professionals can declare income at a prescribed rate on turnover under the presumptive taxation scheme, which simplifies tax filing. Under the Income Tax Act, it reduces compliance, bookkeeping, and audit requirements.
@Surbhi_Pal@TeamQuicko Say a F&O Trader has 80 Lakhs Turnover and Profit is 60 Lakhs. He is opting for Presumptive Taxation (Sec 44AD) as he is unable to maintain books of accounts. So can he declare 6% of Turnover i.e. 4.8 Lakhs as profit in ITR?
Presumptive scheme mentions tht you should declare actual profit or 6%/8% of turnover whichever is higher. So in the given case profit of Rs. 60 Lakhs needs to be declared as income and not Rs. 4.8 Lakhs (6% of Rs. 80 Lakhs).
But 60 Lakhs is gross profit. He haven’t considered expenses like electricity, rent, internet, books, courses etc. As he is unable to maintain books of a/c, isn’t the same reason why govt. introduced presumptive taxation so that one can declare 6/8% as income and balance will be considered as expenses? And if he can maintain all expenses and derive net profit then he can file ITR 3 business income then what’s the use of presumptive taxation?
Sec 44AD was designed for traditional businesses (shops, contractors etc.) that operate on genuinely low margins of 6-8%, where declaring 6% of turnover as income is a fair approximation of actual net profit. F&O is fundamentally different — the turnover itself is calculated as sum of absolute profits + losses, so the ₹60L is already your net trading P&L, not a traditional gross profit from which expenses are yet to be deducted. While 44AD allows you to skip books and the balance is deemed to cover all expenses, 6% is a minimum floor, not a flat-rate choice — if actual net profit exceeds 6%, you must declare the actual figure. After deducting legitimate expenses (internet, rent, courses etc.), your net profit would still likely be ₹50L+, which is far above ₹4.8L, and declaring 6% in this situation would amount to underreporting attracting penalty u/s 270A.
Tax rules (especially for housing benefits like HRA and accommodation perks) are now linked more closely to the city’s cost of living rather than applying a one-size-fits-all rule.
Major Highlights
1. Higher HRA exemption for metro-like cities
Some cities are now treated similar to major metros
This allows 50% of salary (instead of 40%) to be considered for HRA exemption
Helps people in expensive cities pay less tax
Meaning: If you live in a costly city, you get more tax relief on rent
2. Cost-of-living–based classification
Tax benefits depend on where you live
Bigger or more expensive cities → higher exemptions
Smaller towns → lower limits
This makes taxation more realistic and fair.
3. Month-wise calculation (if you move cities)
If you change cities during the year:
HRA exemption is calculated month-by-month
So your tax benefit adjusts automatically based on location
4. Applies only to salaried employees
HRA-related benefits are not available to self-employed people
Why this change matters
Reflects real living costs (rent varies widely across cities)
Provides fair tax relief
Reduces mismatch between salary structure and actual expenses
Simple Example
Living in a high-cost city → higher rent → higher HRA exemption → lower tax
Living in a low-cost town → lower rent → lower exemption → standard tax
Key Idea
Major Highlights
Meaning: If you live in a costly city, you get more tax relief on rent
Why this change matters
Simple Example