Section 44ADA of income tax act provides that income of an assessee, engaged in profession referred u/s 44AA shall be calculated on estimated basis at sum equal to 50% of the total gross receipt.
What is section 44ADA of income tax act?
Section 44ADA of income tax act provides provisions for computing profits and gain of professionals.
Further, section 44ADA of income tax act provides that income of an assessee, engaged in profession referred u/s 44AA shall be calculated on estimated basis at sum equal to 50% of the total gross receipt. Moreover, this section lowers the compliance burden on small profession and helps in doing business with ease.
Profession referred to in section 44AA such as legal, medical , engineering or architectural profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the board.
Which assesses are eligible under section 44ADA?
Following assesses are eligible under this section:
- Individual
- Partnership firm (excludes LLP)
Which professions are eligible under section 44ADA?
Following professions are eligible under this section:
- Medical
- Legal
- Engineering
- Technical consultancy
- Interior decoration
- Architectural
- Profession of accountancy
- Any other profession
How to calculate income u/s 44ADA?
Assessee must satisfy following conditions :
- The assessee is a resident individual/firm.
- The assessee is engaged in a profession referred to in section 44AA(1)
- Further, Gross receipt of the assessee from the profession does not exceed ₹50 Lakh. It has been increased to ₹75 lakh from A.Y. 2024-25. In case of an assessee where the amount received during previous year in cash / barer or crossed cheque/draft does not exceed 5% of gross receipt of the previous year.
If above conditions are satishfied , income of the assessee shall be calculated on estimated basis at sum equal to 50% of the total gross receipt.
Can assessee declare lower income than deemed profit?
An asseesse can declare lower income than the deemed profits and gains as stated above. The following consequences are applicable if the taxpayer declares his income which is lower than the deemed profits and gains as stated above-
- The assessee will have to maintain the books of accounts as per section 44AA , if his total income exceeds the exemption limit.
- The assessee will have to get his books of account audited under section 44AB if his total income exceeds the exemption limit and audit report should be uploaded one month prior to the due date of submission of return of income.
Points to be noted under section 44ADA of income tax act:
- The assessee can voluntarily declare higher income.
- All deductions under section 30 to 38 , including depreciation and unabsorbed depreciation are deemed to have been allowed . And no further deduction is allowed under these sections. Even salary/interest to partners is not deductible.
Refer :https://taxandfinanceguide.com/section-44ad-of-income-tax-act/
