Definition
Presumptive Taxation 44AD
Section 44AD lets eligible small businesses declare income at a prescribed percentage of turnover instead of maintaining detailed books, simplifying compliance.
Under Section 44AD, eligible resident small businesses below a turnover limit can opt to declare profits at a flat presumptive percentage of turnover, with a lower deemed rate for digital receipts to encourage cashless payments. This frees them from maintaining detailed books and from a tax audit in most cases.
The scheme is designed to ease compliance for small traders and manufacturers. However, once a taxpayer opts in, switching out before a lock-in period can trigger audit and bookkeeping requirements, so the choice should be made with the medium term in mind.
Related terms
- Presumptive Taxation 44AESection 44AE provides presumptive taxation for taxpayers in the business of plying, hiring or leasing goods carriages, based on the number and type of vehicles owned.
- Tax Audit (44AB)Section 44AB requires businesses and professionals above specified turnover or receipt thresholds to get their accounts audited by a chartered accountant.
- Presumptive Taxation (44ADA)Section 44ADA lets eligible professionals declare a fixed percentage of their gross receipts as income, simplifying tax filing without maintaining detailed books of accounts.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.