Section 44AD may apply where turnover and digital receipt conditions are met. This article outlines the relevant provisions.
Section 44AD lets eligible resident individuals, HUFs, and partnerships pay tax on a presumptive income of 8% (6% for digital receipts) instead of maintaining full books of account.
Eligibility: turnover up to Rs 3 crore in a financial year (increased from Rs 2 crore if 95% receipts are through banking channels).
The biggest advantage is no mandatory tax audit and no need for extensive bookkeeping. The trade-off is you cannot claim deductions against the presumptive income.
Many small traders and consultants over-complicate their returns when 44AD would have worked. We review each case in the first meeting and choose the path that saves both tax and compliance effort.
Important: once you opt out of 44AD, you cannot come back for five years. So the decision matters.
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