With effect from assessment year 2011-12, certain assessees engaged in a business are allowed to compute their business income on estimated basis and thus, exempted from maintaining books of account as required u/s 44AA.
In case assessee fulfills certain conditions as given below, then it is presumed that assessees business income is estimated at only 8% of his total turnover or gross receipts. In case assessee wants to declare higher income, he can do so.
Computation of business income on estimated basis u/s 44AD shall be allowed in case assessee fulfills following conditions
(1) This provision is applicable only if assessee is a resident individual, resident H.U.F. or a resident partnership firm (but not a limited liability firm).
(2) Assessee has not, claimed any deduction u/s 10A, 10AA, 10B, 10BA, and 80RRB.
(3) Assessee may be engaged in any business except the business of playing, hiring or leasing of trucks where section 44AE applies.
(4) Assessee’s total turnover or gross receipts in the relevant previous year does not exceed ` 1 crore [ ` 60 laths upto assessment year 2012-13].
Other points to be noted :
(1) In case assessee so wishes, he can declare a higher income in his income-tax return.
(2) If assessee opts for computation of income on estimated basis, then it is also presumed that all provisions regarding calculation of business income have been taken care of. Thus, for the purpose of computing written down value of the block at the end of the previous year depreciation shall be deducted from the value of block. But, in case of a partnership firm, salary or any other renumeration to working partners and interest on capital to partners (as applicable u/s 40(b)) shall be allowed out of estimated business income of 8%.
(3) In case assessee wants to declare lower income than 8%, then he must maintain proper books of account as required u/s 44AA and the assessee has to get his books of account audited u/s 44AB if his total income exceeds the exempted limit.
(4) The income computed on per section 44AD shall only be the business income of the assessee. The other incomes of the assessee shall be added to such presumptive income for calculating total income of the assessee.
(5) Assessee can claim deductions under section 80.
(6) The provisions of Sec. 44AD shall not apply to following persons
(i) A person carrying on profession as referred to in Section 44AA(1),
(ii) A person earning income in the nature of commission or brokage; or
(iii) A person carrying on any agency business.