Finance Bill, 2023Presumptive Income Finance Bill, 202324 Visa Vis Section 44AD (Presumptive Taxation for Business)

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The Tax Publishers Finance Bill, 2023--Presumptive Income Finance Bill, 2023-24 Vis-a Vis Section 44AD (Presumptive Taxation for Business) CA. L. Venkataramanan In this short write-up, the Learned author tries to analyse the amendment of direct tax proposal regarding Section 44AD and impact of the same in the context of maintenance of books of account, tax audit under Section 44AB, TDS disallowance under Section 40(a)(ia) and cash disallowance under Section 40A(3). 1. Introduction With a view to reduce the compliance cost and ease of doing business especially for medium and small industries (not necessarily registered under the MSME Act), Section 44AD presumptive taxation was introduced. There is continuous request from the industry to increase the eligible turnover limit (at present 2 crore rupees) for Section 44AD. In the Finance Bill, 2023, the Government has proposed to increase the limit from 2 crore rupees to 3 crore rupees subject to condition that cash receipts does not exceed the 5% of the total turnover or gross receipts. 2. Special provisions for computing profits and gains of business on presumptive basis The existing provision of Section 44AD of the Income Tax Act, inter-alia provides for a presumptive income scheme for small businesses. This scheme applies to certain resident assessees (i.e. an individual, HUF or a partnership firm other than LLP) carrying on eligible business (any business, except the business of plying, hiring or leasing goods carriages referred to in Section 44AE) and having a turnover or gross receipt of two crore rupees or less. Under this presumptive scheme, a sum equal to 8% (other than bank mode prescribed) or 6% (bank mode prescribed) of the turnover or gross receipts is deemed to be the profits and gains from business, subject to certain conditions. If assessee has claimed to have earned higher sum than 8% or 6%, then that higher sum is taxable. As per the Finance Bill, 2023 amendments, existing the limit of turnover or gross receipts for eligibility under Section 44AD (2 crore rupees) is proposed to be increased to 3 crore rupees, where the amount or aggregate of the amounts received during the previous year, in cash, does not exceed five per cent of the total turnover or gross receipts. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Finance Bill, 2023--Presumptive Income

Finance Bill, 2023-24 Vis-a Vis Section 44AD (Presumptive Taxation for Business)

CA. L. Venkataramanan

In this short write-up, the Learned author tries to analyse the amendment of direct tax proposal regarding Section 44AD and impact of the same in the context of maintenance of books of account, tax audit under Section 44AB, TDS disallowance under Section 40(a)(ia) and cash disallowance under Section 40A(3).

1. Introduction

With a view to reduce the compliance cost and ease of doing business especially for medium and small industries (not necessarily registered under the MSME Act), Section 44AD presumptive taxation was introduced. There is continuous request from the industry to increase the eligible turnover limit (at present 2 crore rupees) for Section 44AD. In the Finance Bill, 2023, the Government has proposed to increase the limit from 2 crore rupees to 3 crore rupees subject to condition that cash receipts does not exceed the 5% of the total turnover or gross receipts.

2. Special provisions for computing profits and gains of business on presumptive basis

The existing provision of Section 44AD of the Income Tax Act, inter-alia provides for a presumptive income scheme for small businesses. This scheme applies to certain resident assessees (i.e. an individual, HUF or a partnership firm other than LLP) carrying on eligible business (any business, except the business of plying, hiring or leasing goods carriages referred to in Section 44AE) and having a turnover or gross receipt of two crore rupees or less. Under this presumptive scheme, a sum equal to 8% (other than bank mode prescribed) or 6% (bank mode prescribed) of the turnover or gross receipts is deemed to be the profits and gains from business, subject to certain conditions. If assessee has claimed to have earned higher sum than 8% or 6%, then that higher sum is taxable.

As per the Finance Bill, 2023 amendments, existing the limit of turnover or gross receipts for eligibility under Section 44AD (2 crore rupees) is proposed to be increased to 3 crore rupees, where the amount or aggregate of the amounts received during the previous year, in cash, does not exceed five per cent of the total turnover or gross receipts.