I understand that those earning business income via non-technical consulting can opt for taxation under section 44AD presumptive taxation scheme. Now, I expect to earn about ₹22 lakh in FY23. So, will my tax incidence be 6 per cent of ₹22 lakh, i.e., ₹1.32 lakh (as all amounts are received online)? Am I missing something or is this evaluation correct? TDS at 10 per cent is deducted by the firm as I do not have GST.

Mahesh

We note that you are providing non-technical consultancy services and the same does not fall under the category of legal, medical, engineering, architectural, accountancy, interior decoration, or other profession as per Section 44AA (1) of the Act. Further, we understand that 10 per cent tax is deducted at source on such income for non-technical services u/s 194J of the Income-tax Act, 1961 (‘the Act’).

As per the provisions of Section 44AD, in the case of an eligible assessee (Resident Individual, Resident Hindu undivided family or a Resident partnership firm) engaged in an eligible business (turnover not exceeding ₹2 crore and not into the business of plying, hiring or leasing goods carriages), a sum equal to 8 per cent (6 per cent in respect of amount received by way of A/c payee cheque/ A/c payee bank draft/electronic clearing system) or a sum higher than the aforesaid sum shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.

In the instant case, we assume that you are a resident Individual, and the fees are received electronically, hence 6 per cent of the gross receipt or actual profit made from such profession is required to be offered for taxes in the income tax return.

As per the tutorials issued by the Income Tax Department, a person can declare income at lower rate (i.e. at less than 6 per cent or 8 per cent). However, if he does so and his income exceeds the maximum amount which is not chargeable to tax, then he is required to maintain the books of account as per the provisions of section 44AA and has to get his accounts audited as per section 44AB.

Additionally, if you opt for presumptive taxation scheme u/s 44AD of the Act, then you are also required to follow such scheme for the next five years. If you opt out of the presumptive taxation scheme, the same shall not be available for the next five years following the year of opting out.

The writer is a Partner with BDO India LLP.

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