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Home Acts & Rules Bill Bills FINANCE BILL, 2016 Chapters List Chapter III DIRECT TAXES This

Clause 26 - Amendment of section 44AD. - FINANCE BILL, 2016

FINANCE BILL, 2016
Chapter III
DIRECT TAXES
  • Contents

Amendment of section 44AD.

26. In section 44AD of the Income-tax Act, with effect from the 1st day of April, 2017,-

(a) in sub-section (2), the proviso shall be omitted;

(b) for sub-sections (4) and (5), the following sub-sections shall be substituted, namely:-

“(4) Where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1).

(5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee to whom the provisions of sub-section (4) are applicable and whose total income exceeds the maximum amount which is not chargeable to income-tax , shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.”;

(c) in the Explanation, in clause (b), in sub-clause (ii), for the words “one crore rupees” occurring at the end, the words “two crore rupees” shall be substituted.

 



 

Notes on Clauses:

Clause 26 of the Bill seeks to amend section 44AD of the Income-tax Act relating to special provision for computing profits and gains of business on presumptive basis.

The existing provisions contained in the said section provides that notwithstanding anything to the contrary contained in section 28 to 43C, in the case of an assessee engaged in any business having total turnover or gross receipts not exceeding one crore rupees, a sum equal to eight per cent. of the total turnover or gross receipts, or, as the case may be, a sum higher than the aforesaid sum declared by the assessee in his return of income, shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profit and gains of business or profession”.

The proposed section 44AD seeks to provide for estimating income of assessee who is engaged in any business, at a sum equal to eight per cent. of the total turnover or gross receipts, or, as the case may be, a sum higher than the aforesaid sum earned by the assessee. The scheme will apply to such residential assessee who is an individual, Hindu undivided Family or partnership firm but not Limited Liability Partnership firm, whose total gross receipts does not exceed two crores rupees. 

It is further proposed that the scheme does not apply to an assessee, who is carrying on profession as referred to in subsection (1) of section 44AA or earning income in the nature of commission or brokerage or carrying on any agency business and who has claimed deduction under any of the section 10AA, 10A, 10B, 10BA or deduction under any provisions of Chapter VI-A. Under the scheme, the assessee will be deemed to have been allowed the deduction under sections 30 to 38. Accordingly, the written down value of any asset used for the purpose of the business of the assessee will be deemed to have been calculated as if the assessee had claimed and had actually been allowed the deduction in respect of depreciation for the relevant assessment years.

It is proposed to substitute sub-sections (4) and (5) of the aforesaid section to provide that where an assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1). 

It is further proposed that an assessee to whom the provisions of sub-section (4) are applicable and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.

It is also proposed to increase the threshold limit of one crore rupees specified in the definition of “eligible business” to two crore rupees in the Explanation. 

These amendments will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017- 2018 and subsequent years.

 
 
 
 

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