If you are a professional i.e Consultant, Blogger, Freelancer or provide any other service which comes under professional income, you can use this Presumptive-Tax. Presumptive-Tax u/s 44ADA of the Income Tax Act is for the professional having income up to Rs50 Lakh per annum. Under this scheme, Professional has the option to pay tax on only half of the professional income earned.
This scheme was introduced to relief the small or medium-sized taxpayers.
List of professions who can avail Presumptive-Tax are.
Terms and Conditions for obtaining the presumptive-taxation scheme
Benefits under Presumptive-Taxation Scheme.
No need to maintain books of accounts
If you choose to presumptive taxation scheme, no need to maintain records of expenses and income proofs
Your profit will be reduced to 50%
Once you opt for presumptive-tax profit, you cannot show the expenses incurred for that year, 44ADA scheme will consider only 50% profit as your Net Income.
No Audit required
This scheme is available only to a resident assessee who is an individual, HUF or Partnership firm (other than LLP).
If George is earning Rs.30 Lakhs for the financial year through the profession and his total expenses for the given year is Rs.10 Lakhs.
If George file his ITR normally with showing expenses then his taxable income will be
Income – Rs. 30 Lakhs
Expenses – Rs. 10 Lakhs (less)
Net Taxable Income – Rs. 20 Lakhs
So George will be taxed for RS.20 Lakhs
But, if he chooses to file with presumptive tax scheme (u/s 44ADA)
Income – Rs.30 Lakhs
Exempt – Rs 15 Lakhs (50% Income Exempted according to sec 44ADA)
So George will be taxed for Rs.15 Lakhs