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

  1. No deduction of any expenses under section 30 to 38.is allowed .
  2. 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.
  3. This scheme is not for Specified Professions  like Accountant/Interior Designers/Film artists/IT Professionals/Company Secretary/Doctor/CA/CS etc  

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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 9 years. He also provides Accounts Tax GST Training in Delhi and Pune.