• Can I apply for presumptive tax under 44AD?

Hello,
 I work for a UK based company from India. I formed a proprietorship company that has a contract with the UK company. The contract states that I am a PMO who provides management services for the company for projects. My overall annual salary will be around 1 Cr and all the transactions would happen digitally through my company bank account. From what I understood, I do not come under section 44AA(1) and can pay 6% of my overall income as advance tax. Can I please get advice on my status and the right tax category?
Asked 1 year ago in Income Tax

Since you are providing contract service you can claim benefit of 44AD and consider 6% as your net profit

Vishrut Rajesh Shah
CA, Ahmedabad
928 Answers
39 Consultations

5.0 on 5.0

Yes you are right you come under 44ADA and according to that taxation will apply in your case.

Damini Agarwal
CA, Bangalore
407 Answers
31 Consultations

5.0 on 5.0

- For the purposes of taxation, Proprietorship and Individual is same person 

- At same point of time, either you can receive salary or professional/consultancy income from same employer 

- Whether services provided by you to UK employer falls within the ambit of Section 44AA(1) or not is subject to discussion with you to identify the scope of services? Merely saying management services, will not work to decide the applicability of section 44ADA/44AD

- Under presumptive taxation, tax is payable on higher of "deemed minimum percentage u/s 44AD/44ADA or actual profit"

- Also you have to obtain GST registration and file returns on regular basis. Under GST such supply of services are treated as export of services and you can supply services without payment of taxes subject to obtaining LUT

 

For detailed discussion, you may opt for phone consultation

Vivek Kumar Arora
CA, Delhi
4863 Answers
1052 Consultations

5.0 on 5.0

Individual can either receive a salary or professional/consultancy income from the same employer at a given point in time. In case of receipt of salary income, the individual would be subject to tax deduction at source (TDS) by the employer, while in case of receipt of professional/consultancy income, the individual would be responsible for paying the taxes on such income.The applicability of Section 44AA(1) would depend on the nature and scope of the management services being provided by the individual to the UK employer. The term "management services" is a broad term, and the specific nature of services would need to be examined to determine whether the individual falls under the purview of Section 44AA(1) or not.

Presumptive taxation scheme of Section 44AD/44ADA, tax is payable on the higher of the "deemed minimum percentage" or the actual profit earned by the individual. The individual can opt for the presumptive taxation scheme if the total turnover or gross receipts of the business do not exceed Rs. 2 crores in a financial year.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

 

Thank you.

Shubham Goyal
https://www.linkedin.com/in/ca-shubham-goyal-7b15491a2/

Shubham Goyal
CA, Delhi
238 Answers
4 Consultations

5.0 on 5.0

Is it a one person company or a sole proprietorship?

What's PMO?

6% would be your income and that is minimum income and you need to pay tax on it. Please note that if your actual profit is more you should pay tax on it.

You might get covered under technical consultancy under 44AA and accordingly fall under 44ADA. Definition of technical consultancy under section 9.

 

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Thank you.

Naman Maloo
CA, Jaipur
4280 Answers
98 Consultations

5.0 on 5.0

Sir,

from your above 

1) if you are giving services then it's no matter who is receiving it, you can go for 44AD and pay tax @ 6% of your receipt.

2) but somewhere in your statement you mentioned, your annual salary will be Rs. 1 Cr, if you are getting your payment as salary then dear you cannot take the benefit of sec 44AD because 44AD is only for business receipt not for salaried person, then in that case you have to pay tax on your full receipt.

 

if you have any further query please feel free to ask

Vishal Khandelwal
CA, JAIPUR
31 Answers

Not rated

The terms of contract are important to decide whether you are an employee or a service provider.  If you are an employee, the employer will have to deduct tax on your salary by computing your tax liability.  If you are a service provider, the contractee will have to deduct tax @ 10% u/s 194J for providing management services. 

If you are an employee, then you need to offer your income as salary income only. Your salary income will be assessed after considering all the allowances and standard deduction. 

On the other hand, if you are a service provider, you can offer the income under presumptive taxation us/ 44AD. 

However, it appears that your status is that of an employee from the information you provided in your query and  a definite view can be taken only after the review of your contract.

B Vijaya Kumar
CA, Hyderabad
1007 Answers
124 Consultations

5.0 on 5.0

Hello,

The determination of whether you are classified as an employee or a service provider depends on several factors, including the terms of your contract, the nature of your work, and the level of control exercised by the contracting party.

If you are a service provider, you are often considered self-employed or an independent contractor. In this case, you are responsible for reporting your income and paying taxes on it. and you can delcare your income under presumptive taxation us/ 44AD. 

In general, if you are an employee, your employer is responsible for deducting taxes from your salary and remitting them to the appropriate tax authority. Your income will typically be subject to various deductions, allowances, and tax calculations.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

 

Thank you.

Shubham Goyal
https://www.linkedin.com/in/ca-shubham-goyal-7b15491a2/

Shubham Goyal
CA, Delhi
238 Answers
4 Consultations

5.0 on 5.0

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