Last year, my turnover was Rs. 1.15 Crore & was covered by presumptive taxation. Whether TDS provision applicable for this year?

Query]

I am in individual assessee. Last year, my turnover was Rs. 1.15 Crore but was covered but I have offered income on presumptive basis @ 8%? Whether I have comply with the TDS provision in this year? [CA. JV]

Opinion:

It’s an interesting question. Before coming to the specific issue, one needs to read section 44AB as well as relevant TDS provisions. Let us check it

1. All the TDS contains the following clause for making individual / HUF liable for complying with the TDS provision:
   “Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44ABduring the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section.”

 

2. Tax Audit provision is contained in section 44AB of the Income Tax Act – 1961 which reads as under:

 

Audit of accounts of certain persons carrying on business or profession.

 

44AB. Every person,—

(a)  carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year; or

(b)  carrying on profession shall, if his gross receipts in profession exceed fifty lakh rupees in any previous year; or

(c)  carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AE or section 44BB or section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or

(d)  carrying on the profession shall, if the profits and gains from the profession are deemed to be the profits and gains of such person under section 44ADA and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his profession and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year; or

(e)  carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,

get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed :

⁶²[Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year:]

Provided ⁶²[further] that this section shall not apply to the person, who derives income of the nature referred to in section 44B or section 44BBA, on and from the 1st day of April, 1985 or, as the case may be, the date on which the relevant section came into force, whichever is later :

Provided ⁶³[also] that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and furnishes by that date the report of the audit as required under such other law and a further report by an accountant in the form prescribed under this section.

Explanation.—For the purposes of this section,—

 (i)  “accountant” shall have the same meaning as in the Explanation below sub-section (2) of section 288;

(ii)  “specified date”, in relation to the accounts of the assessee of the previous year relevant to an assessment year, means the due date for furnishing the return of income under sub-section (1) of section 139.

 

The careful reading of TDS provision as well as section 44AB clearly conveys the following:

1. If the turnover is exceeding Rs. 1 Crore for business men or Rs. 50 Lakh for professional, then the individual taxpayer will be required to comply with the TDS provision. Needless to say, non compliance would result in disallowance u/s 40a(ia) and would result make the person nod doing TDS as “Assessee in default”.
2. What if the assessee in such case again opts for presumptive scheme of taxation in next year? In such case, there would be no disallowance u/s 40a(ia) as Section 40AD overrides section 40(ia). However, it will make the person making the payment without TDS as “Assessee in default”.