What is Section 44AD Persumtive Income of Business?

  1. It is special scheme for small  business(Resident Individual/Partnership/Huf) whose turnover is up to 1 Crore  2 crore
  2. These business need not maintain any books of accounts nor get their accounts audited
  3. In their case 8% of turnover is deemed to be their PGBP Income (8% is the Minimum Amount,Assessee can show higher amount also)


New Amendment

If amount received directly in bank account then 6% is deemed to be their PGBP Income

 

Earlier

If Turnover of Business upto 1 Crore,then 8 % of Turnover is Profit

No need to make books of accounts

No need to do Audit

 

Now FY 2016-17 (AY 2017-18)

If Turnover of Business upto 2 Crore,then

8 % of Turnover is Profit for Cash Transactions

6% of Turnover is Profit for Other Transactions

No need to make books of accounts

No need to do Audit

Important points

  • No deduction of any expenses under section 30 to 38.is allowed .
  • If the assesse feels that his profit is less than 8% of turnover then he has to compulsory maintain books of accounts and get the accounts audited under Section 44AB.
  • This scheme is NOT for Specified Professions  like Accountant/Interior Designers/Film artists/IT Professionals/Company Secretary/Doctor/CA/CS etc  

44ad new.png

 

Question 1

What is the PGBP Income of a proprietorship (Individual) as per Section 44AD in following cases 

Particulars Case 1 Case 2 Case 3 Case 4
Cash SALES 1000000 5000000 8000000 12000000
Less        
Expenses 800000 4800000 8100000 9000000
Profit/loss 200000 200000 -100000 3000000

 

View Answer

Question 2

 Can in Case 1,assessee show PGBP income of 200000 in ITR ?

View Answer

Question 3

Can in Case 2,assessee show PGBP income of 200000 in ITR ?

 

View Answer

Question 4

Can in Case 3,assessee show loss of 100000 in ITR ?

View Answer

 

 

Other Points

  • Assessee cannot claim deductions under Section 30 to 38. But they can claim other deduction like Chapter VIA Deduction (Section 80C) etc. or section 40 (b) Deduction for partners.
  • In case,they sell their assets,Capital Gains will be computed assuming Depreciation has been charged on Assets 

 

 

NON APPLICABILITY

1.Specified Professions u/s 44AA

like Accountant/Interior Designers/Film artists/IT Professionals/Company Secretary/Doctor etc)

 

2 Persons Claiming Certain Deductions u/s 80IA to 80 RRB

 

3..Section 44AE Business

(Business of Plying ,hiring,leasing Goods Carriages)

 

4.Companies/LLP

 

5.When Turnover >1 Cr

 

  6.All Non Residents

  1. Income Tax
  2. PGBP Income

About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 10 years. He also provides Accounts Tax GST Training in Delhi and Pune.