Can a person use 44AD and 44ADA simultaneously if he has income from both businesses, as well as a profession?
To conclude the above statement, it is necessary to understand the applicability of both sections.
What does Section 44AD and Section 44ADA of the Income Tax Act comprise? Who shall be covered under this section?
Section 44AD: Highlighted under Presumptive Taxation Scheme of the Income-tax Act 1961, Section 44AD specifies definite criteria for the eligible taxpayers who can pay their Income tax availing certain benefits under this section.
Conditions to be eligible to file under Section 44AD
– The taxpayer should be a Resident Individual/ Proprietorship Firm/HUFs/ Partnership firm (excluding Limited Liability Partnership).
– Gross receipts or annual turnover of the firm or Individual from the business should not exceed Rs 3 crore (w.e.f AY 2024 25) if total cash receipts were not more than 5%. If cash receipts are more than 5% then the limit is Rs. 2 crores.
– Should have 8% or more income declared as the profit of the total turnover or gross receipts (6% for those making all transactions digitally).
– Firm should not have claimed tax deduction under Section 10A, 10AA, 10B,10BA.
– Individuals who have not claimed deduction under Section 80HH to 80 RRB.
– Have not claimed any deduction for Salary/Remuneration/Interest paid to partners.
– If a taxpayer opts out of this taxation scheme in any year, he cannot avail the benefit of 44AD for the next 5 years.
– If the taxpayer carries more than one business then the income of all businesses in aggregate would be considered to determine turnover.
– No books of accounts are to be maintained under 44AD.
– No audit would be required under Section 44AB.
– The taxpayer should file his return in form ITR – 4 SUGAM
Conditions to be eligible to file under Section 44ADA.
– Applicable to Individual/ HUF/Partnership firm (Excluding LLP).
-Persons engaged in any profession as defined in section 44AA as read with rule 6F.
Including – Accountancy/Architectural/Authorised Representative/Company Secretary/Engineering/Film artist, actors, cameraman, editor\Interior decorator/Legal/Medical/Technical consultancy/Information technology.
Not Including – Advertising agencies/Insurance agents/Shipping agents/Travel Agents/Courier Agency/Clearing, forward & shipping agencies/Nursing Home, etc.
– Should have gross receipts or total income less than 75 lakhs if total cash receipts were not more than 5%. If cash receipts are more than 5% then the limit is Rs. 50 Lakhs.
– Should have declared more than 50% of gross receipts as profit income (i.e. deemed profit).
– If claimed only deductions under Section 30 to Section 38.
– The taxpayer is not required to maintain books under section 44AA.
– The taxpayer is not required to get accounts audited under section 44AB.
– If a taxpayer opts out of the taxation scheme of 44ADA in any year, he cannot avail the benefit of 44ADA in the next 5 years).
– If declared Income is less than 50% of gross receipts, then the taxpayer is required to get his accounts audited.
Who cannot opt for Presumptive taxation under Section 44AD?
– A person engaged in any profession as declared under Section 44AA cannot opt for a presumptive taxation scheme for business specified under Section 44AD.
– Individuals/Firms covered under Section 44AE (engaged in the business of plying and hiring of goods carriages cannot opt for Section 44AD.
– A person engaged in any Profession, agency business, or providing any professional services in nature of getting brokerage or commission is not eligible for Section 44AD.
– Individuals/firms claiming any depreciation or expense cannot opt for Section 44AD.
– If the business turnover crosses 3 crores, then Section 44AD cannot be applied.
As concluded above, a registered professional under Section 44AA, filing ITR under Section 44ADA is not eligible to avail of benefits under Section 44AD.
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