• Presumptive income wrongly u/s 44ADA at 50% instead of u/s 44AD at 6%

Hi,

I am a self-employed Management Consultant. I possess no professional qualifications (Legal, medical, engineering or architectural, accountancy profession, technical consultancy, interior decoration or any other profession notified by the Board in the official gazette) falling under 44ADA. I receive the fee directly into my bank account.

I request your advice and guidance on the following :-

1.	AY 2017-18
Brief background:
The original ITR3 Return filed ON time; Received the Intimation u/s 143 (1); And received the Refund also.

I realize now that in the original ITR-3 return filed, I shown the presumptive income wrongly u/s 44ADA at 50% INSTEAD of u/s 44AD at 6%. I am entitled to receive an additional Refund (amounting to Rs.1.28 Lacs).

Following are the relevant details :-
AY 2017-18	As per original ITR3	ITR Rectification/Revision being sought
Filed on	30-Jul-2017	 
Income from House Property	2,32,830	2,32,830
Income from Business	(u/s 44ADA - 50% of Rs.19,90,862)
 9,95,432	(u/s 44AD - 6% of Rs.19,90,862)
1,19,900
Total Income	12,28,261	3,52,730
Deductions	(2,29,385)	(2,29,385)
Taxable Income	9,98,880	1,23,345
Tax Payable	1,28,519	0
TDS	1,97,094	1,97,094
Refund Received	68,575	68,575
Balance Refund to be received ==>>	1,28,519

Please guide me :-
a)	to the process of filing the Rectification/Revised Return so that I could get the balance Refund amount.
b)	Additionally, let me know whether I can use ITR-4 form as against ITR-3 form originally filed.

2.	AY 2018-19
Brief background:
The original ITR4 Return filed ON time; Received the Intimation u/s 143 (1); And received the Refund also.

I realize now that in the original ITR-4 return filed, I shown the presumptive income wrongly u/s 44ADA at 50% INSTEAD of u/s 44AD at 6%. I am entitled to receive an additional Refund (amounting to Rs.2.87 Lacs).
 
Following are the relevant details :-
AY 2018-19	As per original ITR4	ITR Rectification/Revision being sought
Filed on	31-Jul-2018	 
E-filing Ack. Ref.	[deleted]	 
Income from House Property	2,06,105	2,06,105
Income from Business	(u/s 44ADA - 50% of Rs.29,92,069)
14,96,035	(u/s 44AD - 6% of Rs.29,92,069)
1,79,530
Income from other source	1,02,770	1,02,770
Total Income	18,04,910	4,88,405
Deductions	(2,50,884)	(2,50,884)
Taxable Income	15,54,030	2,37,520
Tax Payable	2,87,070	0
TDS	2,99,214	2,99,214
Refund Received	12,144	12,144
Balance Refund to be received ==>>	2,87,070

Please guide me :-
to the process of filing the Rectification/Revised Return so that I could get the balance Refund amount.

3.	ADDITIONAL BRIEFING
a)	As an additional information, I wish to state that for AY 2019-20, I filed the ITR showing the presumptive income CORRECTLY u/s 44AD at 6% choosing the business code as 16019 – (Other professional services n.e.c.) and received the Intimation u/s 143 (1) and received the Refund also.
Asked 1 month ago in Income Tax from Chennai, Tamil Nadu

You can file the rectification till 4 years against such 143(1) order.

You need to generate rectification in xml format and then under e file tab of e-filing website you can file rectification.

How much profit did you show in above 2 returns?

Were they exact 50%?

Yes you can and you should use ITR 4, as you were incorrect in using ITR 3 for such income.

If you need any assistance for filing rectification feel free to contact me.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
2688 Answers
24 Consultations

5.0 on 5.0

Hi,

 

At the outset, let me tell you that it is very risky to use section 44AD for management consultancy business. In my opinion you have rightly paid taxes u/s 44ADA and your actual profit will be way higher than 6% and possibly more than 50%.

 

Coming to your question, the last date to revise return for AY 2016-17 and AY 2017-18 has been elapsed and you cant file it. Rectification cant be filed in such cases as its not mistake apparent from record. Ita a change in view. You may try filing rectification if portal allows you to do so but you may receive notice from tax department.


The portal won't allow changing the ITR form while filing rectification request.

Lakshita Bhandari
CA, Mumbai
4255 Answers
239 Consultations

5.0 on 5.0

Hello,

 

There are various issues involved in this case.

Firstly as per Sec. 44ADA, Presumptive Taxation, 50% of the gross receipts or the actual profit, higher would be taxable. Now you must have declared some actual profit.

Sec. 44AD, also speaks the same, 6/8% or the actual profit, whichever is higher would be taxable.

Now how would you reduce your actual profits? That won't be acceptable.

Revised return time limit os over.

In rectification, you won't be allowed to reduce the total income.

 Also, the TDS deduction must have been made u/s. 194J, which again doesn't play in your favor.

 

I hope that this answer satisfies your requirements.

 

Regards,

CA Hunny Badlani

Badlani & Associates

Hunny Badlani
CA, Madhya Pradesh
1587 Answers
5 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

Now, you can't file revised return for AY 2016-17 & AY 2017-18. The due date has been lapsed.

 

Also, If you receive any notice from the income tax department then you can file the return.

 

Rectification is not possible in the said scenario.

 

It is advisable to file ITR 4 instead of ITR 3.

 

Payal Chhajed
CA, Mumbai
3730 Answers
50 Consultations

5.0 on 5.0

Ask a Chartered Accountant

Get tax answers from top-rated CAs in 1 hour. It's quick, easy, and anonymous!
  Ask a CA