44AD not applicable even if income less than 8/6 percent of turnover!


Presumptive income under section 44AD of Income Tax Act 1961

Presumptive taxation means income is calculated on presumptive basis rather than on actual basis. A person opting for presumptive income has to declare income on certain percentage and is relived from maintaining books of accounts and getting audited under section 44AB.


Who can opt for presumptive scheme under section 44AD of Income Tax Act 1961?

Any business with a turnover not more than 2 crores can take benefit under presumptive scheme of taxation under section 44AD. Under presumptive scheme the profits of businesses are presumed as 8% of sales with a business turnover less than 2 crore (6% of total payments received digitally)

Persons not eligible for presumptive scheme under section 44AD

  1. Agency business
    2. Commission or brokerage business
  2. Limited liability partnership.
  3. Individual/HUF having income less than basic exemption limit.

In case of multiple business then each business can claim presumptive taxation provided that the business are eligible for presumptive scheme of taxation if not then income is calculated as per normal provisions.

Advantages of presumptive scheme

  1. Maintenance of books of accounts not required
    2. Audit of books of accounts not required
    3. Chapter VIA deductions are available
    4. All the expenses are assumed to be allowed



If person opts out of the scheme of presumptive taxation under section 44AD than he cannot avail the benefit of scheme of presumptive taxation for next 5 years.

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