What is Presumptive Taxation scheme:
To safeguard the small taxpayers from the tedious task of maintaining regular accounts book, Presumptive Tax Scheme was designed. According to the Section 44AA of the Income-tax Act, a person involved in business must maintain regular books of account under certain circumstances. Sections 44AD, sections 44ADA and sections 44AE under presumptive Taxation scheme small enterprises are offered some reliefs on the same.
A person adopting the presumptive taxation scheme can declare income at a prescribed rate and, in turn, is relieved from the tedious job of maintenance of books of account.
What is section 44AD?
Income computed as per section 44AD which is 8% of turnover or gross income of the qualified business, for the preceding year will be net income for the business covered under this scheme. From the net income calculated as mentioned, the business body is not allowed to claim any exemption under sections 30 to 38 which includes depreciation or unabsorbed depreciation.
Note- If the business enterprise has made all their transactions, throughout the year, via electronic money transfer mode they can show 6% of gross turnover.
The condition for picking this scheme is that, your turnover must be less than Rs. 2 crores and you must be either of the following:
- An eligible resident individual.
- A resident Hindu Undivided Families (HUFs)
- A resident partnership firm.
Note-limited liability partnership (LLP) firms are not allowed to adopt this scheme.
If you are qualified for the PTS, do register your business under the scheme and enjoy tax benefits.