Section 44AD - Special provisions for computing profits and gains of business on presumptive basis - Income Tax - Ready Reckoner - Income Tax

Section 44AD :- Special provisions for computing profits and gains of business on presumptive basis This scheme is applicable to an individual, a HUF or a partnership firm who is a resident but not to a LLP firm . This scheme is not applicable to - The assessee who has claimed any deduction under sections 10A , 10AA , 10B , 10BA , or under any provisions of Chapter VIA (i.e u/s 80-IA to 80RRB ) the relevant AY. a person carrying on profession as referred to in section 44AA(1) a person carrying income in the nature of commission or brokerage a person carrying on any agency business a person who is in the business of plying , hiring or leasing goods carriages not applicable to LLP, a company assessee or AOP/BOI, etc. Eligible Business/profession The scheme is applicable for business whose total turnover/ gross receipt in the PY of the business should not exceed ₹ 2 crore. where the amount or aggregate of the amounts received during the previous year, in cash, does not exceed 5% of the total turnover or gross receipts of such previous year, then assessee can compute his return for upto ₹ 3 crore . [Amended by FA, 2023 ] Meaning of receipt in Cash include the receipt of amount or aggregate of amounts by a cheque drawn on a bank or by a bank draft, which is not account payee. [Proviso added by FA, 2023 ] Presumptive income A sum equal to 8% of total turnover or gross receipts in the PY of the assessee shall be deemed to be the profits and gains of such business. The rate shall be 6% of total turnover or gross receipts received by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed during the PY or before the due date u/s 139(1) in respect of that PY. However the existing rate of 8% shall apply for any other mode of gross receipts. Non-allowability of deductions while computing presumptive income Any deduction u/s 30 to 38 shall be deemed to have already been given and no further deduction shall be allowed also a firm shall not be allowed for deduction on account of interest and salary paid to partners if the firm is covered u/s 44AD . Where an eligible assessee declares profit under this section and for any of the 5 consecutive AY relevant to the PY not in accordance with section 44AD(1) , then he shall not be eligible to claim benefit of this section for 5 AY in which profits has not been declared under this section. Advance tax Obligation The eligible assessee opting for section 44AD required to pay advance tax by 15th March of the Financial year. Requirement of maintenance of books of account u/s 44AA and Audit u/s 44AB If eligible assessee declares profits and gains in accordance with the provision of section 44AD, he is not required to maintain books of account u/s 44AA and get them audit u/s 44AB. If the declaring profit on presumptive basis u/s 44AD say, for A.Y. 2024-25 Non - declaration of profit on presumptive basis for any of the 5 successive A.Y.s thereafter (i.e. from A.Y. 2025-26 to A.Y. 2029-30) say for A.Y. 2026-27 would disentitle the assessee from claiming profits on presumptive basis for five successive AYs subsequent to the AY relevant to the PY of such non-declaration (i.e. from A.Y. 2027-28 to A.Y. 2031-32). In such a case, the assessee would have to maintain books of account and other document u/s 44AA(2) and get his account audited u/s 44AB, if his total income exceeds the basic exemption limit in those years.