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Income Tax for Professional, Advertising under Section 44AD, 44ADA at Absolute Ease without Maintaining Books of Accounts

Income Tax for Professional, Advertising under Section 44AD, 44ADA at Absolute Ease without Maintaining Books of Accounts

Are you a Professional or Generating Income Online through Advertising like Google Adsense. Using Section 44AD, Section 44ADA of Income Tax - You do not need to Maintain any Books of Accounts

 

Section 44AD, 44ADA - Income Tax

Are probably the most Powerful Sections of Income Tax for Small Business or Professional – which can empower you to file taxes at absolute ease without maintaining documents and bills

The Core Idea of Section 44AD and Section 44ADA is based on ‘Presumptive Taxation’

What is Presumptive Taxation

As you all know, that if you are doing business – you have to maintain books of accounts along with invoices, vouchers, bills, income proof, expenses made for accounting purpose of calculating Profit and losses, Balance sheet and final taxes based on same

But Presumptive Taxation defies this core accounting idea and gives a profile set of Income Tax Assessee in business (meeting tax criteria as laid) an opportunity to declare profits as set percentage without any hassles of maintenance of books of accounts

What in Layman view means – you do not need to maintain accounts of expenses, salary paid, vouchers – but only from the Income received has to declare set percentage as profit and thus pay taxes on it

 

How are Taxes Calculated and Eligible Profiles

  Section 44 AD Section 44 ADA
Eligibility Tax Assessee Individual (Proprietorship), HUF or Partnership Firm without Liability as per IT Act Individual (Proprietorship), HUF or Partnership Firm without Liability as per IT Act
     
Eligibile Profession Self Employed only Self Employed only
     
Eligible Business All Business Except Professionals and Except Select Business having Nature of Agency, Commission, Brokerage, Hire, Leasing, Transportation Professionals (Legal, Medical, Engineering or architectural, Accountancy, Technical consultancy, Interior decoration or other professionals - Film Artists. Sports Person,  Company Secretaries and Information technology)
     
Maximum Sale / Turnover / Gross Receipt in a Financial Year Rs 2 Crore Rs 50 Lakh
     
Presumptive Profits 8% of Turnover or Gross Receipts / 6% (if all receipts or sale are done through Digital Mode) 50% of Gross Receipts
     
Expenses Included in Business for Deduction No - Only Flat Presumptive Profits Calculated No - Only Flat Presumptive Profits Calculated
     
Other Deduction No Benefits or Deductions allowed u/s 30 to 38 No Benefits or Deductions allowed u/s 30 to 38
     
Mandatory Condition Once an assessee opt for presumptive taxation scheme then he is required to follow same method for next 5 Assessment Years Once an assessee opt for presumptive taxation scheme then he is required to follow same method for next 5 Assessment Years

Thus based on the Presumptive Profits, the final taxes are calculated in based on the slab

For example – if a person working under Proprietorship capacity in Advertising space or generate Google Adsense revenue of Rs 25 Lakh as Gross receipts – because he does not fall under Section 44 ADA due to Advertising / Google Adsense not a part of Professionals or his nature of business as blogging related to various topics may not fall under professional list – can use section 44AD to declare presumptive profit at 8% on his total gross receipts at Rs 2 Lakh and may thus not be required to pay any taxes

On other hand – if any Doctor or Consultant is declaring in income of Rs 20 Lakh – then can also use in Section 44 ADA to declare profit at 50% i.e at Rs 10 Lakh and can pay income tax which will be just Rs 1.25 Lakh

It seems that even Government is also aware that Professionals also takes there fees in cash (which may not be 100% declared in as receipts in there final income declaration) and thus has created this differentiation in under Section 44AD and Section 44ADA

But – the biggest beneficiary is that – No Hassles of Maintaining books of accounts related to expenses or prepare Balance Sheet / Profit and loss / calculate depreciation and a straight away presumptive profits is calculated based on set percentage as defined of 8% or 50% under relevant section

Its a revolutionary way of Filing Income Tax returns for Small Business / Professionals

1. They may not need to run after there CA or Tax Expert to file there returns

2. No need to Maintain Expenses side of Accounts as what matters here is only Turnover or Gross Receipts

3. No need for any Profit Loss Account or Balance Sheet Creation

4. No Vouchers, Bills needs to be maintained for Salary Paid, Petty Expenses etc

You can simply concentrate on your Business or Profession on its growth and pay tax at presumptive rates without any other conditions

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Comments 2

Guest - Sonia on Monday, 28 May 2018 21:50

Hello There,

I think Due to lack of clarity in the rules many people are suffering. In such sensitive cases, everything should be clear. Is our government not capable of listing all the possible businesses, professions one by one and passing income tax/rules accordingly?

I am running a website and my all income comes from Google Adsense. This financial year my income exceeded 50 lakhs. Now I have no idea how should I proceed. Most of the CA's also try to complete the formalities rather than understanding the whole scenario. What would you suggest to someone like me?

Hello There, I think Due to lack of clarity in the rules many people are suffering. In such sensitive cases, everything should be clear. Is our government not capable of listing all the possible businesses, professions one by one and passing income tax/rules accordingly? I am running a website and my all income comes from Google Adsense. This financial year my income exceeded 50 lakhs. Now I have no idea how should I proceed. Most of the CA's also try to complete the formalities rather than understanding the whole scenario. What would you suggest to someone like me?
Guest - CA O P K Singla, Chandigarh on Thursday, 21 June 2018 13:38

In my opinion it comes u/s 44DA.

In my opinion it comes u/s 44DA.
Guest
Wednesday, 18 September 2019

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