• 44AD for both company and director/partner

Hello,

I'm currently earning around 60L per annum as an unregistered sole proprietor and I'm filing my taxes using 44AD(6% of the gross income as my business is digital marketing). Everything is fine on that front until now. And I want to continue filing this income under 44AD in the coming years. 

But in the coming weeks, I want to start a company (Partnership Firm or LLP or Pvt Ltd) with a friend of mine with a professional office setup. This company has no connection with my current business and so, I would continue to earn 60L individually. I read somewhere that if I go with registering a Pvt Ltd company, directors of pvt ltd company can't use 44AD section. Is that true? Which type of company would be best suitable for my needs, which is to let me file my current business to be filed under 44AD? It'd also be an advantage if the company can file their taxes under 44AD or at the least possible tax rates. But the taxation of the company is only a second preference. I don't want to start a company and start paying 30% of the 60L I earn just because of that.
Asked 1 year ago in Income Tax

No that's not true at all the fact is just that they can't use ITR 4 but that doesn't waive their right of using 44AD.

Company cannot use 44AD but partnership can but there are some limitations in there too.

Company is not required to pay 30% tax now.

 

I think we should have a phone consultation and may I can help you with best suitable option for you.

 

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
3893 Answers
52 Consultations

5.0 on 5.0

Hi,

 

Companies are not eligible to claim benefits of section 44AD. 

 

You can very well claim benefits of section 44AD even if you are a director in the company. Its only that you will not be able to claim 44AD on director remuneration. For your own 60 lacs, you can claim assuming other conditions of 44AD is met.

Lakshita Bhandari
CA, Mumbai
5572 Answers
661 Consultations

5.0 on 5.0

Hello,

 

Being a company's director, you would still be able to use Sec. 44AD for your individual income.

Sec. 44AD is not available to the companies.

I hope this answer satisfies your requirements.

 

Regards,

CA Hunny Badlani

Hunny Badlani
CA, Madhya Pradesh
2584 Answers
12 Consultations

5.0 on 5.0

Hi

 

Below are the types of tax assesses who can adopt the provisions of presumptive taxation scheme Under Section 44AD :

  • Resident Individual tax payers
  • Hindu Undivided Families
  • Partnership Firm (except LLP or Limited Liability Partnership Firm)

Below conditions are to be satisfied for adopting presumptive taxation scheme under Section 44AD of the Income Tax Act:

  • The firm or individual’s gross receipt or annual turnover in the previous year should not have exceeded Rs. 2 crores

Therefore benefits of section 44ad is not available to companies. 

In your individual capacity you can opt for section 44AD.

For better planning please  have a phone consultancy. 

Karishma Chhajer
CA, Jodhpur
2439 Answers
27 Consultations

5.0 on 5.0

In my opinion, you can continue filing return under 44ADA till your income does not exceed 2 Cr. Company will be filing a seperate return. The salary that you draw from company will be included in your return filed under sec 44ADA.

 

Ruchi Goel Anchal
CA, Gurgaon
469 Answers
5 Consultations

5.0 on 5.0

Hi,

 

Depending upon the nature of services for which you withdraw the professional fees, you may opt for 44ADA. This is irrespective of the fact whether you choose pvt ltd or llp.

 

LLP seems to be more tax effecient than a company from a wholistsic perspective.

 

 

Lakshita Bhandari
CA, Mumbai
5572 Answers
661 Consultations

5.0 on 5.0

This will be included as income from salary and taxable at slab rate. 44AD will be applicable for business income.

 

Yes, tax rate applicable on companies is 25% plus cess and LLP is 30% plus cess.

Ruchi Goel Anchal
CA, Gurgaon
469 Answers
5 Consultations

5.0 on 5.0

- Either go for partnership firm or LLP. Presumptive taxation scheme is available to partnership firm. In LLP if you withdraw profits there would not be DDT.

- Presumptive taxation scheme is available for business and profession income only and not for other income.

Vivek Kumar Arora
CA, Delhi
4243 Answers
408 Consultations

5.0 on 5.0

You need to show it under Salary income.

Correct as far as tax on company and LLP is concerned.

You need to show it as regular salary and pay tax on same at regular slab because regular director of company who is also a member cannot draw remuneration as professional fees.

Naman Maloo
CA, Jaipur
3893 Answers
52 Consultations

5.0 on 5.0

Hi

 

Salary income will be taxable under the salary salary rate of tax will be slab rate applicable to you.

 

Section 44 AD is applicable on business & professional income only.

 

Yes rate of tax applicable on company is 25 % plus cess & LLP is 30 % plus cess.

Karishma Chhajer
CA, Jodhpur
2439 Answers
27 Consultations

5.0 on 5.0

The salary you draw from the company would be taxable under the Salary head at slab rates applicable to you.

LLP would be a better option.

 

Hunny Badlani
CA, Madhya Pradesh
2584 Answers
12 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

Section 44AD only applies in case of Individuals, Partnership & HUF provided they are Resident in India. This section does not apply in case of Limited Liability Partnerships as they have been specifically excluded from this section.

 

But, as an individual, you can very well take the benefit of section 44AD.

 

Payal Chhajed
CA, Mumbai
5132 Answers
191 Consultations

5.0 on 5.0

-You need to pay the taxes on salary as per applicable slab rate.

 

-Yes, your understanding is correct.

Tax rate applicable on companies is 25% plus cess and LLP is 30% plus cess.

 

-As per my opinion, LLP would be better option.

Payal Chhajed
CA, Mumbai
5132 Answers
191 Consultations

5.0 on 5.0

Dear Sir,

 

If you receive any remuneration in the capacity of director then you cannot opt for a presumptive Scheme.

 

The Presumptive Scheme is only Available for Resident Individual, HUF and Partnership firms.

 

Thanks and Regards

Shiv Kumar Agarwal

Shiv Kumar Agarwal
CA, Delhi
475 Answers
74 Consultations

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