By Himanshu Joshi, Accounts Associate, Dezan Shira & Associates
Mar. 8 – In order to provide small business owners relief from the tedious work of book keeping, auditing and compliance, sections 44AD and 44AE of the Income Tax Act 1961 allows an assessee to determine their income on a presumptive basis. This allows income to be determined at a fixed rate of turnover or a fixed amount, but only for persons that run a business (not a professional worker).
Please find a summary of these two sections below.
Section 44AD
Every assessee that has an eligible business may declare a minimum 8 percent of total turnover or gross receipts as profits from their business. However, total business turnover may not exceed Rs.1 crore.
An eligible assessee is an individual, Hindu Undivided Family (HUF) or a partnership firm (that is not a LLP) who is a resident and has not claimed deductions under section 10A, 10AA, 10B or sections 80-IA to 80RRB.
An eligible business refers to any business other than those mentioned in section 44AE.
Under section 44AD, an assessee is exempted from advanced taxes so far as they relate to their eligible business.
