{"id":24459,"date":"2019-09-11T09:54:38","date_gmt":"2019-09-11T04:24:38","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=24459"},"modified":"2021-07-13T17:51:12","modified_gmt":"2021-07-13T12:21:12","slug":"what-is-the-presumptive-taxation-scheme","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/what-is-the-presumptive-taxation-scheme\/","title":{"rendered":"What is the Presumptive Taxation Scheme?"},"content":{"rendered":"<p class=\"has-drop-cap\">With\neffect from 1<sup>st<\/sup> April 2017, a new section &ndash; 44ADA was introduced for\nsimplifying the tax compliances of small professionals. Section 44ADA was\nintroduced under the presumptive taxation scheme of which Section 44AD and 44AE\nwere already a part. <\/p>\n\n\n\n<p>The\nprimary aim for the insertion of this section is the introduction of special\nmethods and provisions for calculation of the income tax liabilities of\nprofessionals based on profit &amp; gains from their services on a presumptive\n<a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Basis&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;In finance, the &amp;quot;basis&amp;quot; is a term with several applications, including representing the difference between the spot price and the future contract price of an asset, which is vital in investment(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/basis\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>basis<\/a>. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What\nis the Presumptive taxation scheme?<\/strong><\/h2>\n\n\n\n<p>The\npresumptive taxation scheme was introduced to lessen the tax burden of\nbusinesses of small businesses, which had a turnover of less than INR 2 crores.\nSection 44ADA was introduced for reducing the tax liability of individual\nprofessionals with a limited income. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Section 44ADA- Overview<\/strong><\/h2>\n\n\n\n<p>If\nan individual is a professional, a freelancer or a consultant, he\/she can avail\nthe benefits of this section and can pay the tax on half of his\/her gross\nannual income by opting for the Presumptive Taxation Scheme. For availing the\nbenefits of this section, the assesses should have a gross annual income of INR\n50 Lakhs or less. <\/p>\n\n\n\n<div class=\"shadow1\"><strong>For example,<\/strong> Mr. A is engaged in the profession of practicing Company Secretary, and his gross annual income for the FY 17-18 is INR 30 Lakhs. Work-related expenses are INR 2 Lakhs, and unabsorbed depreciation outstanding is INR 5 Lakhs. The total taxable Income under Presumptive scheme &amp; non-presumptive scheme would be as follows: <\/div>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>\n  <strong>Particular<\/strong>\n  <\/td><td>\n  <strong>Presumptive Scheme<\/strong>\n  <strong>&nbsp;<\/strong>\n  <\/td><td>\n  <strong>Non-Presumptive Scheme<\/strong>\n  <\/td><\/tr><tr><td>\n  <strong>Income<\/strong>\n  <\/td><td>\n  Rs.30,00,000\/-\n  <\/td><td>\n  Rs.30,00,000\/-\n  <\/td><\/tr><tr><td>\n  <strong>Deduction<\/strong>\n  <\/td><td>\n  Rs.15,00,000\/-\n  (Claim 50% Of Income)\n  <\/td><td>\n  Rs.7,00,000\/-\n  (Work-related expenses)\n  <\/td><\/tr><tr><td>\n  <strong>Total Taxable Income<\/strong>\n  <\/td><td>\n  Rs.15,00,000\/-\n  <\/td><td>\n  Rs.23,00,000\/-\n  <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Applicability of Section 44ADA<\/strong><\/h2>\n\n\n\n<p><strong>Benefits of this section can be enjoyed by:<\/strong><\/p>\n\n\n\n<ul><li>Resident\nengaged in the profession of:<strong><\/strong><\/li><li>Legal<\/li><li>Medical<\/li><li>Engineering<\/li><li>Architect<\/li><li><a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Accounting&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Accounting is the language of business, serving as the backbone of financial management and decision-making. It involves the systematic recording, analysis, and reporting of financial(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/accounting\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>Accounting<\/a> or technical\nconsultancy<\/li><li>Interior decoration<\/li><li>Gross\nreceipt of the assessee doesn&rsquo;t exceed INR 50 Lakhs in a previous financial\nyear.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Exceptions Under Section 44ADA<\/strong><\/h2>\n\n\n\n<p><strong>Following exceptions are applicable on assesses taking benefit of Section 44ADA:<\/strong><\/p>\n\n\n\n<ul><li>It\nis assumed that deduction allowed under the provisions of section 30 to section\n38 has been applied and further and such deduction cannot be claimed further.<\/li><li>Depreciation,\nunabsorbed depreciation, and other deductions are assumed to have been claimed\nunder this section.<\/li><li>An\nassesses who opts for the benefits under section 44ADA is not required to\nmaintain books of account that are required to be maintained under section 44AA.<\/li><li>The\nassessee who opts for the benefits under section 44ADA is also not required to get\nhis accounts audited as required under section 44AB.<\/li><\/ul>\n\n\n\n<div class=\"read\"><p><b>Recommended Article<\/b> <mark><a href=\"https:\/\/enterslice.com\/learning\/read-the-amazing-history-of-income-tax-of-india\/\" target=\"_blank\" rel=\"noopener noreferrer\">The Amazing History of Income Tax in India- Read Now<\/a><\/mark>.<\/p><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>The Due Date for Payment of Tax Under Section 44ADA<\/strong><\/h2>\n\n\n\n<p>Under\nthis presumptive taxation scheme, the taxpayer needs to pay 100% of the full\nadvance tax on or before the 15<sup>th<\/sup> day of March of the financial\nyear. <\/p>\n\n\n\n<p>Earlier\nwhen the section was introduced in FY 2016-17, the advance tax was paid in four\ninstallments.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Income Tax Return Filing for the Assesses Having Income Under Profession<\/strong><\/h2>\n\n\n\n<p>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 <strong><a href=\"https:\/\/enterslice.com\/learning\/filling-itr%e2%80%904-sugam\/\">Form ITR-4 (Sugam)<\/a><\/strong>. 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.&nbsp; <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Features of the Presumptive Taxation Scheme Under Section 44ADA<\/strong><\/h3>\n\n\n\n<ul><li>An\nindividual should have income from any profession with income up to INR 50\nLakhs to claim the benefit of paying tax under section 44ADA.<\/li><li>An\nindividual need not maintain books of account or get the audit done.<\/li><li>An\nindividual has to pay 100% of the advance tax on the 15<sup>th<\/sup> of every\nMarch, with no requirement to pay tax in four installments.&nbsp; <\/li><li>If\nan individual claims the deduction of this section of the entire 50% of income,\nhe cannot claim the deductions under other sections.<\/li><li>An\nindividual must be a Resident of India.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Eligible Person for Filing of ITR-4<\/strong><\/h2>\n\n\n\n<p><strong>Following persons are eligible to file their income tax return in form ITR-4 for the FY 18-19:<\/strong><\/p>\n\n\n\n<ul><li>Business\nunder section 44AD or 44AE<\/li><li>Professional\nincome under section 44ADA<\/li><li>Salary\nincome up to INR 50 Lakhs.<\/li><li>Income\nfrom One House <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Property&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Property refers to the legal designation of ownership over valuable items or assets held by an individual or a business. This ownership grants the holder certain legal rights to use, consume,(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/property\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>Property<\/a> up to INR 50 Lakhs.<\/li><li>Income\nfrom other sources up to INR 50 Lakhs.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Steps to File ITR-4<\/strong><\/h2>\n\n\n\n<p><strong>Following is the simplified procedure to file an income tax return:<\/strong><\/p>\n\n\n\n<ul><li>Go to online website <em><strong>https:\/\/www.incometaxindiaefiling.gov.in\/<\/strong><\/em> and login to the user portal<\/li><li>Use PAN &amp; password to login into the account<\/li><li>Click on the e-file menu and drop down will appear and then select &ldquo;Income Tax Return.&rdquo;<\/li><li>After this, it will take you to the next portal in which the details of AY, form type, etc. have to be selected. Select ITR-4 under the head &ldquo;ITR form Number.&rdquo;<\/li><li>This form can be submitted online through e-verification or even offline by uploading the <strong>XML sheet<\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Office_Open_XML\">[1]<\/a><\/sup>.<\/li><li>Complete the form and submit it for e-verification<\/li><li>Following e-verify option are there for e-verification:<\/li><li>E verification through registered DSC<\/li><li>Aadhaar OTP<\/li><li>EVC using the pre-validated bank account<\/li><li>EVC using pre-validated DEMAT account<\/li><li>Click on, continue and submit the final form by entering OTP or EVC. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Advantages of Filing Return under Presumptive Taxation Scheme<\/strong><\/h2>\n\n\n\n<p><strong>There are three benefits of filing tax under the scheme:<\/strong><\/p>\n\n\n\n<ul><li>The\nITR-4 form is relatively smaller &amp; less complex compared to regular return\nforms.<\/li><li>Professionals\ncan file their tax return on their own due to ease and simplicity of the form\nthat save their huge amount of professional charges of consultants.<\/li><li>There\ncan be lots of saving under this scheme. Entire 50% is exempted from income and\ntax is paid at the very minimal amount of income left after deduction.<\/li><\/ul>\n\n\n\n<div class=\"read\"><p><b>Also, Read<\/b> <mark><a href=\"https:\/\/enterslice.com\/learning\/budget-2019-hike-in-the-tax-exemption-limit\/\" target=\"_blank\" rel=\"noopener noreferrer\">Budget 2019: Hike in the Tax Exemption Limit<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>With effect from 1st April 2017, a new section &ndash; 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 [&hellip;]<\/p>\n","protected":false},"author":24,"featured_media":24468,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[2435],"tags":[2736],"acf":{"service_id":"220"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What is the Presumptive Taxation Scheme - Section 44ADA<\/title>\n<meta name=\"description\" content=\"Presumptive Taxation Scheme - The Income Tax Act 1961 introduced section 44ADA to address the tax compliances of small professionals with limited income.\" \/>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterslice.com\/learning\/what-is-the-presumptive-taxation-scheme\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What is the Presumptive Taxation Scheme - Section 44ADA\" \/>\n<meta property=\"og:description\" content=\"Presumptive Taxation Scheme - The Income Tax Act 1961 introduced section 44ADA to address the tax compliances of small professionals with limited income.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterslice.com\/learning\/what-is-the-presumptive-taxation-scheme\/\" \/>\n<meta property=\"og:site_name\" content=\"Enterslice\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/enterslice\" \/>\n<meta property=\"article:published_time\" content=\"2019-09-11T04:24:38+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-07-13T12:21:12+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/09\/44ADA-For-Taxpayers.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"630\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:creator\" content=\"@enterslice\" \/>\n<meta name=\"twitter:site\" content=\"@enterslice\" \/>\n<!-- \/ Yoast SEO plugin. -->","authorName":"Savvy Midha","authorImageUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/10\/Savvy-Midha.jpg","authorDescription":"\"Savvy Midha holds the degrees of Bachelor of Commerce(honors), LL.B and Company Secretary. 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