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With effect from 1st April 2017, a new section – 44ADA was introduced for simplifying the tax compliances of small professionals. Section 44ADA was introduced under the presumptive taxation scheme of which Section 44AD and 44AE were already a part.
The primary aim for the insertion of this section is the introduction of special methods and provisions for calculation of the income tax liabilities of professionals based on profit & gains from their services on a presumptive basis.
The presumptive taxation scheme was introduced to lessen the tax burden of businesses of small businesses, which had a turnover of less than INR 2 crores. Section 44ADA was introduced for reducing the tax liability of individual professionals with a limited income.
If an individual is a professional, a freelancer or a consultant, he/she can avail the benefits of this section and can pay the tax on half of his/her gross annual income by opting for the Presumptive Taxation Scheme. For availing the benefits of this section, the assesses should have a gross annual income of INR 50 Lakhs or less.
Benefits of this section can be enjoyed by:
Following exceptions are applicable on assesses taking benefit of Section 44ADA:
Recommended Article The Amazing History of Income Tax in India- Read Now.
Under this presumptive taxation scheme, the taxpayer needs to pay 100% of the full advance tax on or before the 15th day of March of the financial year.
Earlier when the section was introduced in FY 2016-17, the advance tax was paid in four installments.
Income Tax Return of assesses who are eligible to declare their income from their profession on presumptive taxation basis under section 44ADA is filed in Form ITR-4 (Sugam). However, if the assessee maintains the books of account u/s 44AA and gets his books audited u/s 44AB, then filing of Form 4 is not mandatory. Such an individual can opt for filing ITR through regular return form, i.e., ITR-3 or ITR-5.
Following persons are eligible to file their income tax return in form ITR-4 for the FY 18-19:
Following is the simplified procedure to file an income tax return:
There are three benefits of filing tax under the scheme:
Also, Read Budget 2019: Hike in the Tax Exemption Limit.
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