For small proprietorship and partnership business
There is no need to maintain books of accounts and get accounts audited by CA
They can straight away show 8% of turnover as Profit and pay Income tax on it
(As per Section 44AD)
Note:-8% is Minimum Profit to be shown, Assesses can show more than 8% profit also

 

What if assess show less than 8% profit or loss?  
It is not allowed as per Section 44AD
He has to compulsorily gets accounts audited and pay tax on it.


Note:-
This Scheme is applicable for Small business whose turnover is upto 1 crore(Form Financial Year 2016-17,limit is increased to 2 Crore )
This scheme only for Proprietorship and Partnership who are Resident

 

Sectio 44AD Scheme now 6% for non cash payment

For FY 2015-16 (AY 2016 - 17)

  • 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

  • Sectio 44AD Scheme
  • For FY 2016-17 (AY 2017-18) onward
  • 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

While Others Changes are applicable from FY 2017-18 (AY 2018-19), this budget change is applicable from FY 2016-17 (AY 2017-18) onwards

 

DOWNLOAD AND TRY

Q1 A

Suppose a person has turnover of 20 lacs 
What is his business Income How much Income tax he is payable by him

View Answer

Q1 B

Can person show his Income to be 350000

-a-

Yes, 8% is the Minimum Tax
He can show more than 8% also

PARTICULARS AMT
TURNOVER 2000000
PROFIT AND GAIN OF BUSINESS AND PROFESSION 350000
(MINIMUM 8% OF TURNOVER)  
GROSS TOTAL INCOME 350000
TAX 5000
REBATE 2500
NET TAX 2500
CESS 75
TAX+ CESS 2575

Q1 C

Person Claims that he has actually made a profit of only 50000
Can he show this profit in return?

-a-
He has to show Minimum Profit of 1600000(2000000 x 8%)
If he claims that his profit is less than 160000,he has to maintain proper books of account and get accounts audited by CA


Q1 D

Person Claims that he has actually made a loss of 30000
Can he show this loss in return?

-a-
He has to show Minimum Profit of 1600000 (2000000 x 8%)
If he claims that his profit is less than 160000 or he suffers a loss,he has to maintain proper books of account and get accounts audited by CA


Q2


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
SALES 1000000 5000000 8000000 25000000
Less        
Expenses 800000 4800000 8100000 9000000
Profit/loss 200000 200000 -100000 16000000
View Answer

Note:-
In Case 4,person has to compulsorily maintain books of accounts and get accounts audited,he cannot claim Section 44AD
Also in Case 3,if person wants to show loss,he also has to compulsorily maintain books of accounts and get accounts audited,he cannot claim Section 44AD

 

Q3
What is the PGBP Income of a proprietorship (Individual) as per Section 44AD in following case ?

 Particular  Amount
Turnover 5000000
Profit 1500000
Interest Income on FD 8000
Deductions /Savings under LIC 15000
View Answer

 

  1. Practical Income Tax
  2. Income Tax for Small Business
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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 8 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
  • hem1717's image

    Hi Team ! Pls explain as under Question 2 in Case 1, profit has been shown as Rs. 2,00,000 but why in answer it has taken just Rs. 80,000 and not Rs. 2,00,000 while as per rule the assesses can show more than 8% profit also as per Section 44AD, and it's been shown in question itself. You explained Case 3 & 4 but not Case 1. Do expenses not considered at all with respect to Section 44AD. So pls clear my doubt.

     

    Thanx in advance!

    View answer
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