NEW Section for professionals from F.Y 2016-17, A.Y 2017-18
For whom the presumptive taxation scheme of section 44ADA is designed?
The presumptive taxation scheme of section 44ADA is designed to give relief to small taxpayers
engaged in specified profession.
Eligible persons who can take advantage of the presumptive taxation scheme of section
44ADA
A person resident in India engaged in following professions can take advantage of presumptive
taxation scheme of section 44ADA:-
1) Legal
2) Medical
3) Engineering or architectural
4) Accountancy
5) Technical consultancy
6) Interior decoration
7) Any other profession as notified by CBDT
Manner of computation of taxable income in case of a person adopting the presumptive
taxation scheme of section 44ADA
In case of a person adopting the provisions of section 44ADA, income will be computed on
presumptive basis, i.e. @ 50% of the total gross receipts of the profession. However such person
can declare income higher than 50%.
In other words, in case of a person adopting the provisions of section 44ADA, income will not be
computed in normal manner but will be computed @50% of the gross receipts.
The presumptive income computed @ 50% is the final income and no further expenses will
be allowed
A person who adopts the presumptive taxation scheme is deemed to have claimed all deduction
of expenses. Any further claim of deduction is not allowed after declaring profit @ 50%.
While computing income as per the provisions of section 44ADA, separate deduction on account
of depreciation is not available. However, the written down value of any asset used in such
business shall be calculated as if depreciation as per section 32 is claimed and has been actually
allowed.
Payment of advance tax in respect of income from professions covered under section
44ADA
A person opting for the presumptive taxation scheme of section 44ADA is also liable to pay
advance tax.
Maintenance of books of account if a person opts for presumptive taxation scheme of
section 44ADA
In case of a person engaged in a specified profession as referred in section 44AA(1) and opts for
presumptive taxation scheme of section 44ADA, the provision of section 44AA relating to
maintenance of books of account will not apply. In other words, if a person opt for the provisions
of section 44ADA and declares income @50% of the gross receipts, then he is not required to
maintain the books of account in respect of specified profession.
Provisions to be applied if a person does not opt for the presumptive taxation scheme of
section 44ADA and declares his income from profession at lower rate (i.e. less than 50%)
A person can declare income at lower rate (i.e. less than 50%), however, if he does so, and his
income exceeds the maximum amount which is not chargeable to tax, then he is required to
maintain the books of account as per the provisions of section 44AA and has to get his accounts
audited as per section 44AB.