Who can Opt for the presumptive taxation scheme of section​ 44AD

The presumptive taxation scheme of section​ 44AD can be adopted by the following persons:

1) Resident Individual

2) Resident Hindu Undivided Family

3) Resident Partnership Firm (not Limited Liability Partnership Firm)

In other words, the scheme cannot be adopted by a non-resident and by any person other than an individual, a HUF or a partnership firm (not Limited Liability Partnership Firm).

Who cannot opt for the presumptive taxation scheme of section​ 44AD

The scheme of section 44AD is designed to give relief to small taxpayers engaged in any business, except the following businesses:

• Business of plying, hiring or leasing goods carriages referred to in sections 44AE.
• A person who is carrying on any agency business including Insurance Agent
• A person who is earning income in the nature of commission or brokerage
• Any business whose total turnover or gross receipts exceeds Rs. 2 Crores/ 3 Crores
• Persons engaged in a Profession

Non-maintenance of books of accounts if opting for the presumptive taxation scheme: Is it viable?

No Books in Income Tax, but what about the GST Law

In case your turnover exceeds Rs. 20L, you are required to take a GST Number and maintain books of Accounts as per the GST Law. The turnover limit per the GST law is Rs. 40 Lakh when you exclusively deal in goods. Thus you cannot say, that you don’t need any books of accounts,

Presumptive Scheme works on turnover or gross receipts

• It is interesting to note that income is based on the turnover or gross receipts. The question would be if the books are not maintained, how would the turnover be proved? Therefore, you are not completely absolved from maintaining books, and some records have to be maintained by the Taxpayer.
• If the correct turnover or gross receipts is not ascertainable from the records maintained, it is likely that the same may be estimated by the Assessing Officer in absence of proper records of turnover or gross receipts. Therefore it would be necessary for the eligible assessee to maintain such records with evidences so that the turnover or gross receipts can be conclusively proved.
• Another interesting thing here is that Tax Provisions compare Taxable Income with Book Profits. You should have Books for computing Book Profits.

Presumptive Scheme is not for you in case you have a long-term growth vision

If you want your business and turnover to grow, then the presumptive scheme is not for you. For Example, for two years Mr. A has been opting the Presumptive Scheme. Now his turnover has crossed Rs. 2 Crores mark in 3 year and he is not eligible for the scheme. Now he is required to maintain the Books. Here complications will grow for his in case Books are not maintained, specially because his accountant does not have opening figures.

Books of Accounts are required if Taxpayer wants to come out of Presumptive Taxation Scheme or show less profit. Showing Opening Balances suddenly would be a problem if you have not maintained BOA in past.

Mandatory disclosures in ITR

ITR-4 requires details of Partners/ Members own capital, Secured loans, Unsecured loans, Advances, Sundry creditors, Other liabilities, Fixed assets, Inventories, Sundry debtors, Balance with banks, Cash-in-hand, Loans and advances, Other assets. You should have Books for calculating these figures.