To decrease the tax burden and to offer relief to small tax assesses from laborious work, the Indian government has integrated a Presumptive Taxation.scheme. Businesses that are adopting this scheme are not compelled to maintain the regular account book. Instead, they can directly declare their Income at the prescribed slab rate. Such a respite, isn’t it?
This presumptive taxation scheme is basically framed under two different sections - Section 44AD and 44AE of the income tax Act. In this post, let’s have a look at the provisions that are covered under the former section - 44AD.
Below mentioned are the types of assesses who can adopt the provisions covered under the presumptive taxation scheme of section 44AD:
However, for adopting this possible scheme, certain conditions should be fulfilled, such as:
Eligible assesses who want to choose the presumptive income under section 44AD would have to calculate their income on the Basis of estimation. Generally, it is calculated at 8% of total annual turnover or gross receipts of the business for the previous year. A taxpayer can also declare more income in his ITR than the presumptive income displayed according to the scheme.
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The primary objective of the presumptive taxation scheme under this section is to give relief to small taxpayers from the gruelling task of maintaining accounts book. An assessee, who chooses to adopt the provisions of this scheme, doesn’t have to audit the accounts. However, you must remember that this is only applicable to such businesses that have been covered under section 44AA.
Also, if the tax payer’s actual income is less than the presumptive income, which is 8% of the gross receipt or the total turnover, then he would have to maintain the records and get it audited according to the Sections 44AA and 44AB. And then, if the actual income is more than the presumptive income scheme, then the assessee can declare higher income as per the given option.
Being a taxpayer, you would surely want to be free of auditing and maintaining records, isn’t it? And, if you have a business, section 44AD turns out to be even more rescuing. So, find out if you get covered under this presumptive scheme or not to gain the advantages.
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