Presumptive Taxation under section 44ADA Scheme for Professionals

This article has tried to discuss the Presumptive Taxation Scheme for Professionals concept & applicability. The article discusses Presumptive Income under section 44ADA, Maintaining books of accounts for professionals opting for Presumptive Scheme, Tax Audit requirement under section 44AB for Professionals, Advance Tax Applicability on professional opting for Presumptive Taxation.

Concept & applicability of the scheme:

Section 44ADA was inserted by the Finance Act, 2016, w.e.f. 1-4-2017. It covers special provisions for computing profits and gains of profession on a presumptive basis.

Benefit Given to Professionals under section 44ADA

Resident Indian, engaged in the specified profession, whose total gross receipts do not exceed fifty lakh rupees in a previous year can simply show Taxable Profit of upto 50% of the gross receipts or more in Income Tax Return.

What is a specified profession for Section 44ADA?

The Specified Professions as per section 44AA are:

• Legal,
• Medical,
• Engineering or
• architectural profession or
• The profession of accountancy or
• Technical consultancy or
• Interior decoration or
• authorized representative or
• film artist
• any other profession notified

Expenses not allowed to be deducted if the Professional has opted for Presumptive Taxation Scheme

• Any deduction for expense would be deemed to have been already given full effect in the 50% deduction. No further deduction shall be allowed.
• No Deduction on Account of Depreciation shall be allowed. However, the written down value of any asset used for the purposes of profession shall be deemed to have been calculated as if the assessee had claimed and had been actually allowed the deduction in respect of the depreciation.

Maintainance of Books of Accounts for Professionals

Legal Text

44AA. (1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.

44ADA(4) Notwithstanding anything contained in the foregoing provisions of this section, an assessee who claims that his profits and gains from the profession are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under subsection (1) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.

[Section 44AA read with Rule 6F]

Every person carrying on specified profession shall mandatorily keep and maintain books of account.

[Section 44ADA]

Professional not opting for Presumptive Taxation shall be mandatorily required to maintain Books of Accounts.

Authors Comment:

No, where it is clearly specified that Professional opting for Presumptive Taxation u/s 44ADA is not required to maintain Books of Accounts as per Section 44AA. So thus as per the Authors view, strict interpretation should be made and Books of Accounts should be maintained by the professionals, irrespective of the fact if they are opting for Presumptive Taxation u/s 44ADA or not.

Tax Audit requirement under section 44AB for Professionals opting this scheme:

• Profession showing profits are per Presumptive Scheme are not required to get their Accounts Audited Under Section 44AB.
• However, if the Professional claims that his profits are lower than the presumptive profits, then he is mandatorily required to get his books of Accounts audited by a Chartered Accountant.

Advance Tax Applicability on professional opting for Presumptive Taxation

Professional who declares profits and gains in accordance with the provisions of section 44ADA, is liable to pay advance tax on or before the 15th day of March.  Simple interest at the rate of one per cent on the amount of the tax due shall be applicable is taxpayer fails to do so.