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Section 44AD of the Income Tax Act provides for a presumptive taxation scheme for businesses. Here are the key points regarding the Presumptive Taxation Scheme for Business under Section 44AD:
– Resident Individual tax payers
– Hindu Undivided Families
– Partnership Firm (except LLP or Limited Liability Partnership Firm)
Overall, the Presumptive Taxation Scheme under Section 44AD aims to simplify the tax compliance process for small businesses by providing them with an easier method of computing their taxable income and reducing the burden of maintaining detailed books of accounts.
Under the Income Tax Act’s Presumptive Income Scheme, specifically Section 44AD, certain rules apply to the treatment of assets and deductions for taxpayers opting for this scheme:
Treatment of Fixed Assets: Construction equipment used for rental services can indeed be considered as fixed assets under Section 44AD. These assets contribute to the business’s operations and are essential for generating income.
Restrictions on Deductions: Taxpayers who choose to file returns under Section 44AD are not allowed to claim deductions provided under Section 30 to Section 38 of the Income Tax Act. This includes deductions for expenses such as depreciation, repairs and maintenance, rent, insurance, etc.
Presumptive Income Calculation: Instead of claiming actual expenses and deductions, the income for taxpayers under Section 44AD is calculated presumptively based on a fixed rate of 8% of the turnover or gross receipts of the eligible business for the year. This fixed percentage is deemed to cover all expenses, including depreciation.
Treatment of Depreciation: While no deduction is permitted for depreciation under Section 44AD, the Written Down Value (W.D.V) of any asset used in the business will be calculated as if depreciation has been allowed. This ensures that the asset’s value is accounted for in the business’s financial statements, even though no deduction is claimed for tax purposes.
Disallowance under Section 40(a)(ia): Taxpayers opting for the presumptive tax scheme under Section 44AD are not subject to disallowance under Section 40(a)(ia). This provision typically pertains to the disallowance of certain expenses or payments if they are not deducted or paid within the stipulated time frame.
These provisions aim to simplify the tax compliance process for small businesses and professionals while ensuring that their income is appropriately assessed and taxed under the presumptive income scheme.
– Resident senior citizens without business income.
– Those under presumptive taxation scheme (section 44AD or section 44ADA).
Question: What about membership club that provides hotel to stay in every city like mahindra holidays saffire holidays For this we need ITR-3 or ITR- 4?
Responses:
For a membership club providing hotel services like Mahindra Holidays or Saffire Holidays, the choice between ITR-3 and ITR-4 depends on the nature of income and the club’s structure:
If the club’s turnover is less than Rs. 2 crore and it opts for the presumptive taxation scheme under Section 44AD, it can declare a minimum net income of 8% of the turnover. In such cases, ITR-4 is typically used for filing returns. This simplifies the tax calculation process for the club, making it more convenient and reducing the compliance burden.
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