Last Updated on February 1, 2023 at 3:03 pm
Budget 2023 has proposed welcome changes in the presumptive taxation rules for small businesses and certain professionals.
Section 44AD:
Old rule: Individuals, HUF or partnership firms (other than LLP) with a turnover or gross receipt of two crore rupees or less are eligible. Taxable income (profit from business) can be set to 8% or 6% of the turnover or gross receipts, subject to certain conditions. If the assessee has claimed to have earned a higher sum than 8% or 6%, then that higher sum is taxable
New rule: The threshold has been increased to three crores provided, amount or aggregate of the amounts received during the previous year, in cash, do not exceed five per cent of the total turnover or gross receipts.
Section 44ADA:
Old rule: Certain professionals -See the list here: Who is eligible for taxation under section 44ADA – with total gross receipts not more than fifty lakh rupees in a previous year are eligible. Under this scheme, a sum equal to 50% of the gross receipts is deemed to be the profits and gains from the business. If the assessee has claimed to have earned a higher sum than 50%, that higher sum is taxable.
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New rule: The threshold has been increased to 75 lakhs.
Section 44AB
Old rule: Every person carrying on business is required to get his accounts audited, if his total sales, turnover or gross receipts, in business exceeds one crore rupees in any previous year. if 95% of receipts/payments are in non-cash mode then the limit is ten crores. In the case of a person carrying on a profession, he is required to get his accounts audited, if his gross receipts in profession exceed fifty lakh rupees in any previous year.
New Rule: Those who are opting for presumptive taxation as per the revised rules (if eligible) will not be subject to section 44 AB.
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