PRESUMPTIVE TAXATION FOR PROFESSIONALS : SECTION 44ADA OF THE INCOME TAX ACT, 1961

The Scheme for Presumptive Taxation was introduced under section 44ADA from the F.Y.2016-17. Section 44ADA provides a simple method of taxation for Specified Small professionals. Earlier, the presumptive scheme of tax was applicable only for small business. The presumptive scheme of taxation reduces compliance burden on small professions and facilitates ease of doing business.

Eligilble Business:

The scheme is available to the following Assessee:-

(i)             who is engaged in any profession referred to in section 44AA(1) such as legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette; and

(ii)           Whose total gross receipts does not exceed Rs.50 lakhs in a previous year.

Presumptive Income:

Presumptive income would be a sum equal to 50% of the total gross receipts, or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the Assessee.

Eligible Assessee:

 Resident Individual, Resident HUF and Resident Partnership Firm (Not Including LLP).

Expenditure not allowable:

(i)  Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no  further deduction under those sections shall be allowed. 

 (ii)  In case the Assessee is a firm of Professional's, salary and interest paid to partners is not deductible even though it is within the limit specified under section 40(b).

Deemed written down value:

Written down value of any asset used for the purpose of the profession of the Assessee will be deemed to have been calculated as if the Assessee had claimed and had actually been allowed the deduction in respect of depreciation for the relevant assessment years.

Maintenance of Books of Accounts and Audit not required:

Eligible Assessee opting for presumptive taxation scheme will not be required to maintain books of account under section 44AA (1) and get the accounts audited under section 44AB in respect of such income.

Advance Tax:

Eligible Assessee is required to pay advance tax by 15th March of the financial year.

Opting IN and OUT of the scheme:

Assessee can opt in and opt out of Sec.44ADA at any time without any restriction. Unlike Sec.44AD for business, a professional can opt in and opt out at any time without 5 year restriction.