Amendment of section 44AD.
16. In section 44AD of the Income-tax Act, in the Explanation, in clause (b), after sub-clause (ii), the following provisos shall be inserted with effect from the 1st day of April, 2024, namely:––
‘Provided that where the amount or aggregate of the amounts received during the previous year, in cash, does not exceed five per cent. of the total turnover or gross receipts of such previous year, this sub-clause shall have effect as if for the words “two crore rupees”, the words “three crore rupees” had been substituted:
Provided further that for the purposes of the first proviso, the receipt of amount or aggregate of amounts by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the receipt in cash.’.
Notes on Clauses:
Clause 16 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 provisions of the said section, inter alia, provide for a presumption income scheme for small businesses, under which a sum equal to eight per cent. or six per cent. of the total turn over or gross receipts is deemed to be the profits and gains from business, in case of certain assessees, that is, an individual, Hindu undivided family or a partnership firm other than limited liability partnership, carrying on eligible business and having a turn over of two crore rupees or less. If such assessee has claimed to have earned higher sum than that eight per cent. or six per cent., then that higher sum is taxable.
Clause (b) of Explanation to the said section defines “eligible business” which can avail the benefit of the provisions of the said section to mean any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE, whose total turnover or gross receipts in the previous year does not exceed an amount of two crore rupees.
It is proposed to insert two provisos to the said section to provide an increased threshold limit of three crore rupees where the amount or aggregate of the amounts received by the eligible assessee during the previous year, in cash, does not exceed five per cent. Of the total turnover or gross receipts of such previous year and also that the receipt of amount or aggregate of the amounts by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the receipt in cash.
This amendment will take effect from 1st April, 2024 and will, accordingly, apply in relation to assessment year 2024-2025 and subsequent assessment years.