Section 44 ADA: Presumptive taxation Scheme for professionals

Section 44 ADA: Purpose and benefits

Section 44 ADA was introduced on 1st April 2017. The purpose of this section was to provide a presumptive scheme to professionals. We already have a presumptive taxation scheme for the businessman. This scheme relieves professionals from the tedious task of maintaining books of accounts. It also spares them from the tax audit. But this scheme has some conditions which are required to be fulfilled. You can see the text of the section as given in Income tax Act on this link.

Section 44ADA: Applicability and eligibility

In this para we will discuss the eligible professions and T&C for section 44ADA.

Eligible professionals: 

Section 44ADA is available to the following professionals:

A person resident in India engaged in following professions can take advantage of the 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

Gross receipts limit for eligibility of section 44ADA: 

For availibility of presumptive taxation for professionals, gross receipts limit is Rs. 50lac. He should be a resident of India. We will check the gross receipts of last year to check the eligibility in the current year.

e.g.1: Mr. A is a resident in India. In last year his gross receipts were Rs. 55 lac. In a current financial year, his gross receipts are Rs. 20lac. Is he eligible for presumptive taxation u/s 44 ADA of Income-tax Act?

Answer: No, To avail the benefit of section 44 ADA of Income Tax Act the gross receipts in last year shall be less than Rs. 50 lac.

Thus you can understand that gross receipt of last year will be considered to avail presumptive taxation in CY.

Taxability under section 44ADA of Income Tax Act

Now it is important to know what you will finally get under presumptive taxation scheme. Following are the main benefits of availing this scheme:

1. 50% of the Gross receipts will be assumed as total income. No other deduction for any expanse will be available. The taxpayer will not be eligible to deduct depreciation of any fixed asset. It will be assumed that depreciation is also taken into account.
2. Although the taxpayer can declare more income than the limit given in Section 44 ADA. But if the taxpayer wants to show lesser income, they will have to maintain books of accounts. Tax audit provisions will also be applicable.

ITR Form for presumptive taxation for professionals:

ITR 4 is the form for presumptive taxation. You can download the utility of this ITR from here.

2018_ITR4_PR3

you can reach the author at info@consultease.com