Section 44 AD of Inocme Tax Act, 1961 w.e.f. 1/4/2011

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Is Section 44AD (w.e.f. 1/4/2011) Beneficial or Harsh?

Benefial
1 (50%)
Harsh
1 (50%)

Total Members Voted: 2

Author Topic: Section 44 AD of Inocme Tax Act, 1961 w.e.f. 1/4/2011  (Read 2214 times)

Sanjay Patel

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Section 44 AD of Inocme Tax Act, 1961 w.e.f. 1/4/2011
« on: July 30, 2011, 09:11:59 am »
New Section 44AD says 8% of gross receipts/turnover or higher sum claimed to have been earned by the assessee.
Now there are following consequences: -
1. If income is less than 8%, then subject to 44AD(5), Audit u/s 44AB or show inflated income @ 8% to avoid Audit.
2. But, if income as per books if more than 8%, can assessee opt for Presumptive Taxation u/s 44AD? on the ground that whatever be the situation as per books, i want to avail the benefit of presumptive scheme of taxation for tax purpose as the same is beneficial and tax under normal provisions is higher.
So the big question is CAN 44AD BE TERMED AS A BENEFICIAL SECTION & CAN ASSESSEE OPT FOR TAXATION UNDER 44AD, IN CASE BOTH 44AD & NORMAL PROVISIONS ARE APPLICABLE?
Example: -
The details of business of Mr. A, an assessee, are as under: -
1. Turnover Rs. 50,00,000/- and Net Profit as per Books (assuming the same as TAXABLE INCOME form Business as per IT ACT) is Rs. 20,00,000/-.
2. TAXABLE INCOME @ 8% u/s 44AD comes to Rs. 4,00,000/-.
3. Assuming no other details are applicable the TAX under normal Provisions comes to Rs. 467620/- including cess + Interest u/s 234C for deferment of Advance Tax, if any.
4. Whereas TAX (assuming Income @ of 8%, as above) u/s 44AD (assuming it to be beneficial) comes to Rs. 24720/-, and more importantly no Advance Tax Provisions are applicable.
SO, IS SECTION 44AD INDEED BENEFICIAL for so called SMALL BUSINESSES or HARSH??
SUGGESTIONS INVITED..

satyanveshi

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Re: Section 44 AD of Inocme Tax Act, 1961 w.e.f. 1/4/2011
« Reply #1 on: July 31, 2011, 06:44:42 am »
In the given situation, he can safely file the return with the income asper the provisions of sec.44AD and his capital account will be credited with the profit reflected by him. He can say that he had not maintained any books of accounts. The excess profits earned by him can be spent outside the books of accounts.

Sanjay Patel

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Re: Section 44 AD of Inocme Tax Act, 1961 w.e.f. 1/4/2011
« Reply #2 on: July 31, 2011, 11:56:54 am »
But, if we consider Section 44AD as beneficial then the same can be opted only for the purpose of taxation of income. So the assessee can continue his books as it is because the assessee has opted for a particular beneficial provision for taxation and that will have no bearing on the actual book results. So why to manage excess amount out of books?