QUERY ABOUT SECTION 44 AD OF INCOME TAX ACT

[KASTURI SETHI]

Dear All Experts,

I want to know about the concept of Section 44AD of Income Tax Act.

(i) What are its advantages and disadvantages ?

(ii) Is Section 44AD applicable to only consultancy income (excluding pension) ?

(iii) Once I opt for Section 44AD, am I legally bound to follow this method for 5 years ?

Thanks a lot in anticipation

AI Summary

Clarifying Section 44AD: Presumptive Taxation Scheme for Businesses, 8% Profit Declaration, 5-Year Commitment, Consultancy Exclusion A forum participant inquired about Section 44AD of the Income Tax Act, seeking clarification on its benefits, applicability to consultancy income, and the commitment period. Respondents explained that Section 44AD is a presumptive taxation scheme for business income, requiring a declaration of at least 8% of turnover as profit, or 6% for bank transactions, and mandates adherence for five consecutive years once opted. Section 44ADA, applicable to professional income, allows declaring 50% of gross receipts as profit without a continuous five-year commitment. Participants highlighted the simplicity and reduced tax burden of these schemes, noting the absence of a need to maintain detailed accounts.