Section 44AD of Income Tax Act

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Section 44AD
– The Income
Tax Act, 1961.
Find Complete for Section 44AD. In this article you can find complete
details for Section 44AD like – Introduction for Section 44AD, What
is Section 44AD, What are the criteria for Section 44AD, How to
Apply for Section
44AD, What if he declares income lower than 8%? and Examples for Section
44AD, Now you can scroll down below and Check complete details regarding “Section
44AD – The Income Tax Act, 1961″

Section 44AD – The Income Tax Act, 1961
In order to
prove the above quote correct, The Income Tax Act, 1961 has laid down the rules & provisions of collecting taxes in such a way that there would be no
loss for the tax collectors & no extra
 burden on the
tax payers
. One such
section in this regard is Section 44 AD describing computation of income on
estimated basis in the case of taxpayers engaged in certain business.
So now, Let
us have a brief look on the provisions of the aforesaid Section:
What are the criteria?:
  1. The assessee should be an
    eligible assessee. ( An eligible person is a resident individual or a
    resident HUF or a resident partnership firm.)
  2. He should not claim any
    deductions under section 10A, 10AA, 10B, 10BA, 80HH, 80RRB.
  3. His turnover/ gross receipts should not
    exceed Rs. 1crore
     in the relevant financial year.
How to apply the above section?:
  1. His taxable income would be
    considered to be at least 8% of his total turnover/ gross
    receipts.
  2. He can voluntarily declare more
    income.
  3. He is not required to maintain
    books of accounts.
  4. The individual/HUF can submit
    ITR 4S
     which
    is quite easy as compared to ITR 4.
  5. He will not get any deductions
    under section 30 to 38. (Example: he cannot claim deduction in respect of
    depreciation as it is already deemed to be allowed.)
EXCEPTION: In the case of a partnership firm,
deduction under section 40(b) regarding remuneration & interest to partners
will be allowed.
What if he declares income lower than 8%?:
If he
declares income lesser than 8% of his turnover/ gross
receipts
,
irrespective of his turnover or income, he would be required to:
  1. Maintain books of accounts as
    per section 44A
  2. Get accounts audited under
    section 44AB.
Examples:
  • If Mr.
    Anonymous
     has a
    total turnover/ Gross Receipts of Rs. 30 Lakhs & he is an eligible
    assessee, then he can consider at least 2.4 Lakhs (8% of Turnover/Gross
    Receipts) to be his Taxable income under section 44AD.
  • If Mr.
    Money Ram
     has a
    total turnover/ Gross Receipts of Rs. 150 Lakhs & he is an eligible
    assessee, still he cannot compute his income under section 44AD as his
    turnover/ Gross Receipts exceeds the specified limit of Rs. 1 crore.
Thus, we can
see that how beneficial this section is for common businessmen whose turnover/
gross receipts is not very high. A large number of Taxpayers in India are
availing the benefit of this section & awareness about this
section is a must for every eligible tax payer




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