Simplifying Tax Compliance: Understanding the Presumptive Taxation Scheme
Meaning
Presumptive Taxation scheme is introduced to give relief to small tax payers from the tedious job of maintenance of books of accounts and auditing their books of accounts. Sections 44AD, 44ADA and 44AE covers the presumptive taxation scheme.
Limit to Opt For Presumptive Taxation Scheme
| Category | Previous Limit before 2023 budget | Limit After 2023 Budget |
| Section 44AD: For Small Businesses | Rs. 2 crores | Rs. 3 crores |
| Section 44ADA: For Professionals | Rs. 50 Lacs | Rs. 75 Lacs |
Section 44AD of Income Tax Act
Section 44AD covers presumptive taxation for businesses. Under this section, any business having a turnover of 2 Cr. / 3 Cr. the assessee can opt for presumptive taxation where they can declare profits of 8% for non digital transactions and 6% for digital transactions.
However, Following businesses are not covered under this section
- Life insurance agents
- Commission of any kind.
- Business of plying, hiring or leasing of goods carriages
Which ITR is filed?
ITR-4 is filed.
Sec 44ADA of Income Tax Act
It covers the scheme of presumptive taxation scheme for professionals having gross receipts upto Rs. 50lakhs/ 75 lakhs. The assessee can claim an income of 50% of the gross receipts.
Benefits under Presumptive Taxation Scheme
- Assessee is not required to maintain book of accounts u/s 44AA
- Assessee is not required to get their books of accounts audited u/s 44AB.
