The Presumptive taxation scheme has been introduced by the government in the Income tax Act in a bid to offer relief to small taxpayer category from heavy compliance burden and maintenance of books of accounts. The scheme hence lessens compliance and disclosure requirement as detailed disclosures are not to be made in the ITR form. Further these taxpayers are spared from maintaining books of accounts.
Taxpayer category eligible to avail benefit under Presumptive taxation scheme
Business and professional taxpayers can avail of the scheme benefits provided they meet the turnover or gross receipts threshold limit criteria as laid down in the scheme. The eligible taxpayers declaring their income under the scheme need to pay taxes only on the lump-sum income i.e. arrived at by applying a specified rate of tax on the total income.
Limits for business taxpayer
For businesses the limit is set at Rs. 2 crore i.e businesses with turnover less than Rs. 2 crore can opt for declaring their business profits U/s 44AD or presumptive taxation scheme @ 8%( for cash receipts) or 6% (for digital receipts of turnover).
Wholesale and retail trade plus also those involved in the business of transportation of goods can opt to declare their business profits under the scheme if they meet the above specified turnover criteria. It is to be noted that manufacturing facilities are not entitled for such an advantage under the presumptive scheme.
Eligibility criteria for professionals to opt for presumptive taxation scheme
Professionals can also get their ITR filed before due date on presumptive basis u/s 44ADA. Professionals covered under this scheme are doctors, chartered accountants, interior designers, lawyers etc. Professionals not covered are artisians, news reporters etc.
If the gross receipts from the profession are below Rs 50 Lakhs, the individual may opt for sec 44ADA ( presumptive tax scheme) by declaring 50% of its profession gross receipt as net profit without claiming any expenses therefrom.
ITR Form 4 or ‘Sugam’ for taxpayers opting for Presumptive taxation scheme
Sugam or ITR form 4 as the name suggests is a much simpler form for tax return filing introduced for taxpayers paying tax on presumed income or opting for presumptive taxation scheme. The form with lesser disclosure requirements in contrast to other ITR forms provides ease of compliance to small taxpayer category.
Nonetheless, it is to be noted that taxpayers with business or professional income who maintain books of accounts to claim deduction in lieu of actual expenses incurred while computation of taxable business income cannot use ITR form 4 and instead are required to file their return of income in ITR 3 or ITR 5 as may be the case.
ITR Form 4 can also be used for declaring income from salary or pension, income from other sources and income from one house property.
Conditions that apply when eligible taxpayers opt for this scheme
Once the eligible taxpayer opts for the presumptive taxation scheme, he needs to abide by it for the next five years. Failing which (adoption of this scheme in any of the next 5 years) will result in his withdrawal from the scheme for another 5 years from the time of default.
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