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?
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??