Professional income on presumptive tax scheme section 44ADA

Income tax Section 44ADA is applicable from the assessment year 2017-18 relating to the previous year 2016-17. If a resident taxpayer is engaged in a profession referred to in section 44AA (i.e., medical profession, legal profession, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board) and gross receipts from the profession has not exceed ₹ 50 lakhs. In such case, income is computed on estimated basis at the rate of 50 percent of the total gross receipt. The rate of 50 percent is comprehensive (no further deduction is available).

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APPLICABLE TO

Section 44ADA is applicable from the assessment year 2017-18 and relating to the previous year 2016-17 and section 44ADA is applicable to any resident assessee.

CONDITIONS TO BE SATISFIED

(1) Engaged in Profession: Assessee must be engaged in any profession referred to in section 44AA. (i.e., Legal, medical, engineering, architectural profession or profession of accountancy, technical consultancy, interior decoration, etc.)

(2) Maximum Receipts: Gross receipts of the assessee in the previous year should not exceed ₹ 50 lakh.

ESTIMATED INCOME

Estimated income of the taxpayer 50% of the gross receipts. However, a taxpayer can voluntarily declare a higher income in his return.

IMPORTANT NOTES

(1) Deduction under section 30 to 38: The estimated income is comprehensive and no further deductions under section 30 to 38 shall be allowed.

(2) Depreciation: Depreciation is deemed to have been already allowed. The written down value of asset will be calculated, as if depreciation has been allowed.

(3) Deductions: The above estimated income is aggregated with other income of the assessee, from any other business or under any other heads of income. Further deduction under chapter VIA (other than those mentioned above) shall be available to the assessee as usual.

(4) Brought forward loss: Brought forward loss (if any) shall be subtracted from such estimated income as per provisions of this Act.

(5) Effect if assessee declares lower income: An assessee can declare his income lower than the estimated income as per provision of this section. In such case he will have to: 

• Maintain books of account and other documents as required under section 44AA if his total income exceeds the maximum exemption limit; and 

• Get his accounts audited and furnish a report of such audit as prescribed under section 44AB (irrespective of amount of turnover or gross receipts) if his total income exceeds the maximum exemption limit.

Note: Assessee can change his option from year to year.