What is PRESUMPTIVE TAXATION SCHEME U/S 44ADA
The Motto of Income Tax Act to provide the relief a person, who is engaged in Specified Profession, to maintain the books of accounts and get his accounts audited. If a person opt the presumptive scheme he is not required to maintain the books of accounts and get his accounts audited.
Who can opt the presumptive scheme:
- Resident Individual.
- Resident HUF.
- Resident Partnership Firm (Not included the LLP)
Profession Covered Under Scheme:
Following are the specified professions covered under the presumptive scheme:
- Technical Consultancy
- Interior Decoration
- Any other profession notified by CBDT
Minimum Rate of Profit
- Minimum rate of profit is 50 % of the gross receipts of the Specified Professions for the year.
- A person may voluntarily disclose his Net Profit or income at more than 50 % of gross receipt during the year.
Books of Accounts
In this scheme it is not required to maintain the books of accounts as per Section 44AA if he declare the minimum profit at the 50 gross receipts for eligible professions.
- In this scheme it is required to pay the advance tax on or before 15th March of the previous year.
- If a person fail to pay the advance tax than he is liable to pay the interest U/s 234C.
If Profit declare less than minimum profit
In this scheme if a person declared his income less than 50 % than he is required to maintain the books of accounts as per provision of section 44AA and also required to get his accounts audited as per provisions of section 44AB of I.T. Act, 1961.
If a person opts out from the scheme of section 44ADA
- If a person opt the scheme than he will be continuous follow the scheme for next five years.
- If he failed or opts out from the scheme than such scheme will not be available for him for next five years.
- For example, if he opt the scheme as per Section 44AD for AY 2017-18, AY 2018-19 and 2019-20 and he offers income on basis of presumptive taxation scheme. However, for AY 2020-21, he did not opt for presumptive taxation Scheme. In this case, he will not be eligible to claim benefit of scheme for next five AYs, i.e. from AY 2021-22 to 2025-26.
- Assessee is required to keep and maintain books of account and he is also liable to get his accounts for tax audit as per section 44AB from the AY in which he opts out from the scheme. [If his total income exceeds maximum amount not chargeable to tax]