Presumptive Income


Presumptive Income

Presumptive income under section 44AD and 44ADA of Income Tax Act 1961

As per section 44AA Income Tax Act 1961, every person who is carrying on business or profession is required to maintain booksof accounts. However, to give relief to small tax payers from maintaining books of accounts, presumptive taxation scheme was introduced under section 44AD, 44ADA and section 44AE. 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.

Section 44AD

Under section 44AD of Income Tax Act 1961 following can opt for presumptive taxation scheme:

  • Individual being resident in India
  • HUF being resident in India
  • Partnership firm

having turnover less than Rs 2 crore and calculate their income on presumptive basis @ 8% of turnover (6% of total payments received digitally).

Section 44AE

The presumptive taxation scheme under these provisions can be opted for by an assessee who is engaged in the business of plying, hiring or leasing goods carriages and does not own more

than ten goods vehicles at any time during the previous year. Taxable income under section 44AE will be calculated at Rs 7500 per month per vehicle. All person are applicable for section 44AE scheme i.e. Individual, HUF, Partnership firm, Company, etc

Section 44ADA

  • Individual being resident in India
  • HUF being resident in India
  • Partnership firm

whose total gross receipts do not exceed Rs 50 lakhs can opt for presumptive scheme under section 44ADA of Income Tax Act 1961.

Higher of following is required to be offered as presumptive income:
1. 50% of gross receipts from profession, or
2. Income from profession offered by assessee.

The following are the professionals eligible to the scheme:
  • Legal
  • Engineering
  • Professional of accountancy
  • Interior decorator
  • Architecture profession
  • Technical consultancy
  • Medical profession
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