Section 44AD of Income Tax Act 1962 Presumptive Taxation Scheme for Business

The Government of India introduce Section 44AD for the purpose of providing relief to Small business assesses under Presumptive Taxation Scheme. The assesses under presumptive taxation scheme not required to mainten books of account

But if his turnover / sales exceed rupees one crore, then he is required to get tax audit done and maintain books of account even if income does not exceed taxable limit. This is as per requirements of section 44AA and 44AB.

Section 44AD(1)

1. Notwithstanding anything contain to the contrary contained in section 28 to 43C,

in case of an eligible assesses

engaged in an eligible business

a sum equal to 8% of the total turnover or gross receipts of the assessee in the previous year on account of such business,

or as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee,

shall be deemed to be the income under the head "Profit and gains of Business or profession".

Explanetion: (of Section 44AD)

(a) "Eligible assessee" maens-
(i) an individual ,Hindu undivided family or a partnership firm, who is a resident, but not a limited liability partnership firm and 

(ii) who has not claim deduction under any of the section 10AA or deduction under any provision of Chapter VIA under the heading "C. Deduction in respect of certain income" in the relevant assessment year, i.e. Section 44AD shall not apply where deduction under section 80-IA to 80RRB  are claimed by the assessee.

 (b) "eligible business" means-

(i) any business except the business of plying, hiring or leasing goods carriage referred to in section 44AE  and

(ii) whose total turnover or gross receipts in the previous year does not exceeds an amount of two crore rupees.

Advance learnig on Maintenance of Books of Accounts (Section 44AA- pdf)

Other relevant aspect relating to Section 44AD

→An eligible assessee, who declare income as per the provisions of Section 44AD(1) and whose turnover / gross receipts does not exceeds 2 crores, is not

  • Required to maintained  the books of accounts as per  section 44AA
  • Required to get tax audit under section 44AB

→ If the assessee carrying on business as well as profession then Section 44AD shall be applied only on business income and professional income shall be charged at normal provision of Income Tax Act-1962

→An assessee declaring his income as per presumptive taxation scheme under Section 44AD can also claim deduction under chapter VIA 

→If the assessee is carrying on more than one business, the total turnover of all the business shall be taken into account.

Section 44AD of Income Tax Act 1962 Presumptive Taxation Scheme for Business Section 44AD of Income Tax Act 1962 Presumptive Taxation Scheme for Business Reviewed by Unknown on August 19, 2018 Rating: 5

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