Special provisions for computing profits and gains of business on presumptive basis [Section 44AD] :
(i) The presumptive taxation scheme under section 44AD covers all small businesses with total turnover/gross receipts of up to Rs 100 lakh (except the business of plying, hiring and leasing goods carriages covered under section 44AE).
(ii) Resident individuals, HUFs and partnership firms (but not LLPs) would be covered und er this scheme.
(iii) The scheme would not apply to an assessee who is availing deductions under section 10AA or deduction under any provisions of Chapter VIA under the heading “C.— Deductions in respect of certain incomes” in the relevant assessment year.
(iv) The presumptive rate of tax would be 8% of total turnover or gross receipts. However, the assessee has the option to declare in his return of income, an amount higher than the presumptive income so calculated, claimed to have been actually earned by him.
(v) All deductions allowable under sections 30 to 38 shall be deemed to have been allowed in full and no further deduction shall be allowed. However, in the case of a firm, salary and interest would be allowed as deduction subject to the conditions and limits prescribed under section 40(b).
(vi) The written down value of any asset of such business shall be deemed to have been calculated as if the assessee had claimed and had been actually allowed the deduction in respect of depreciation for each of the relevant assessment years.
(vii) The intention of widening the scope of this scheme is to reduce the compliance and administrative burden on small businessmen and relieve them from the requirement of maintaining books of account. Such assessees opting for the presumptive scheme are not required to maintain books of account under section 44AA or get them audited under section 44AB.
(viii) Further, they would also be relieved from the requirement of advance tax payments. It would be sufficient compliance if they pay their tax while filing their return of income before the due date.
(ix) An assessee with turnover of upto Rs 100 lakh, who shows an income below the presumptive rate prescribed under these provisions, will, in case his total income exceeds the taxable limit, be required to maintain books of accounts under section 44AA and also get them audited under section 44AB.
Thus, merely because an eligible assessee does not opt for presumptive taxation under section 44AD, it would not make him liable to maintain books of account under section 44AA or get the same audited under section 44AB. He will have to comply with these requirements only if his total income exceeds the taxable limit. If his total income does not exceed the taxable limit, the requirement of maintaining books of accounts under section 44AA and having the same audited under section 44AB would not arise.
(x) The following persons are specifically excluded from the applicability of the presumptive provisions of section 44AD –
(a) a person carrying on profession as referred to in section 44AA(1) i.e., 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 (namely, authorized representatives, film artists, company secretaries and profession of information technology have been notified by the Board for this purpose);
(b) a person earning income in the nature of commission or brokerage; or
(c) a person carrying on any agency business.