Clipped from: https://www.thehindubusinessline.com/portfolio/personal-finance/tax-query-applicability-of-presumptive-taxation-under-section-44ada/article66543603.ece
How the provisions can be interpreted by an engineering professional after retirement
If one opts for presumptive taxation scheme, one is required to follow it for five years
I am a pensioner with annual income of ₹15 lakh. As an engineering professional after retirement, I receive additional income of ₹3 lakh. This payment is received only by cheque with TDS deduction. I came to know by way of a response in the Tax Query column that, under presumptive taxation facility under section 44AA and provision 44 ADA, I need to declare only 6 per cent of ₹3 lakh as additional taxable income and need not maintain a business account.
I also came to know that under special provision for computing presumptive consulting taxable profits with gross consulting income not exceeding ₹50 lakh, a sum of 50 per cent of gross income has to be taken into account. I suppose this provision is for those consultants with income only from private consultant practice. Am I correct?
Please clarify what is applicable for me. Should I consider 6 per cent of ₹3 lakh or 50 per cent of ₹3 lakh as taxable income?
Section 44AD is applicable to taxpayers engaged in specified businesses, whereby a fixed portion (minimum 6 per cent) of their turnover is deemed as taxable profits. Section 44ADA is applicable for individuals carrying on specific professions as listed in the Section 44AA [legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified (currently authorised representative, film artist, company secretary and information technology have been notified)].
As you have mentioned that you are rendering engineering consultancy services, which is specified in Section 44AA, you could consider opting for presumptive taxation under Section 44ADA by offering at least 50 per cent of your gross receipts as income.
In case of presumptive taxation under Section 44ADA, all expenses including depreciation are deemed to have been considered while arriving at the 50 per cent. No further expenses can be claimed. If you decide to opt for presumptive taxation scheme, then you are required to follow it for five years. Failure to follow this would result in presumptive taxation not being available for the next five years.
The writer is Partner, Deloitte India
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