Section 44ADA: The best way to file your ITR as a professional

Simplify your ITR filing with Section 44ADA. Learn how to file your ITR as a professional with ease. Read the complete article to know more.

Presumptive Taxation Scheme

Are you a professional who provides services from home? Are you an IT professional or a tuition teacher? If you haven’t maintained proper books of accounts, you can still file tax returns under the presumptive taxation scheme (PTS) under Section 44ADA. This scheme offers a simplified way to file income tax returns and reduces the compliance burden on small professions. In this article, we will discuss why you should consider Section 44ADA for your ITR filing and how it can help you save on taxes.

  • Reduced compliance burden
  • Small professions with limited income
  • No deductions allowed under PTS
  • Easy income calculation

Also Read: Budget 2023 Brings More Professionals under PTS Threshold

The presumptive taxation scheme is a great alternative for resident professionals with gross income/receipts below Rs 50 lakh (AY 2023-24), as it allows them to file their taxes without the need for maintaining account  books. The specified profession includes medical, legal,  engineering or architectural, technical consultancy, accountancy and interior decoration professions. However, the scheme is not available to non-residents and by any person other than an individual, a partnership firm or a HUF, including those having gross turnover or receipts above the specified limit.

Understanding Presumptive Taxation Scheme

The presumptive taxation scheme (PTS) offers a simplified way to file income tax returns and reduces the compliance burden on small professions. A person accepting this scheme can disclose income at a stipulated percentage of gross receipts or turnover and is relieved from the tedious job of maintenance of books of accounts and also from getting the accounts audited.

Calculations under PTS

  • The presumptive taxation scheme (PTS) allows businesses and professionals to calculate their income based on a fixed percentage of their turnover or gross receipts. For businesses, the presumptive income is 8% of the turnover if it is received in cash and 6% if it is received electronically. For professionals, the presumptive income is 50% of the gross receipts.
  • Businesses and professionals can choose to disclose their income at a higher percentage than the prescribed rate and still choose to file their return under PTS.

Also Read: How is PTS applicable to businesses and professionals?

Limitations of PTS

  • If you choose the presumptive taxation scheme (PTS), you must use it for the next 5 years in a row. If you don't, you won't be able to use PTS for the next 5 years after the year you opt out.
  • If you choose to file your taxes under the presumptive taxation scheme (PTS), you will not be able to claim any deductions for expenses you have incurred. This means that you will not be able to deduct things like travel expenses, business expenses, or entertainment expenses.
  • Under the presumptive taxation scheme (PTS), there is no provision for the assessee to carry forward losses to subsequent assessment years.

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Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.


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