• (44AD or 44ADA) Do I need to file tax for actual profit

I am a marketing consultant to tech companies based in USA. My business is registered as a Sole Proprietorship in India. 

I provide the followig services to my clients:

- Market Research (Industry, Competitor, Product, and Customer Research)
- Writing (Copywriting, Content Writing, Research Reports)
- Bespoke Consulting (1:1 Marketing Consulting Calls)

Though I work for software companies, I don't provide any IT, Technical, or Engineering services. I am mostly a Digital Researcher and Writer. 

Further, I have no professional training in this field. In fact, I am a college dropout.

So will my service business come under the purview of Section 44AD or Section 44ADA? 

And do I need to declare my taxable income as my actual profit (more than 80%), or can I get away by opting for presumed profits as applicable under 44AD/44ADA. 

44ADA puts taxable income at 50%. 44AD puts it at 6% for digital receipts.

Ideally, I would like to file under 44AD as my tax liability would be zero up to an income of 1Cr after I claim tax rebate under 87A.

But I am concerned about future legal ramifications, if any. Professional opinion of different CAs is also divided on this. 

Other than that, I am GST compliant (with LoU), registered as a service exporter (IEC code), and also maintain FIRCs for the inward remmitances I receive. 

Right now, my gross receipts are less than 50 LPA. But I might cross that limit soon. All transactions are received digitally.
Asked 20 days ago in Income Tax

- You are eligible for 44AD. Business/Profession income would be 6% of gross receipts or actual profit whichever is higher. You would also be liable to pay advance tax

 

For detailed discussion you may opt for phone consultation

Vivek Kumar Arora
CA, Delhi
4708 Answers
967 Consultations

5.0 on 5.0

You can opt for 44ADA, but if you have more profit then you can declare that even. The Act says for minimum of 50%

Vidya Jain
CA, Kolkata
1002 Answers
58 Consultations

4.8 on 5.0

In my opinion, return will be filed under Sec 44AD, but take profit as 50% because it is a professional service and not a business. Since market research is not mentioned in 44ADA return will have to be filed under Sec 44AD.

Ruchi Goel Anchal
CA, Gurgaon
519 Answers
15 Consultations

5.0 on 5.0

If you are not professional then it will be covered under 44AD.

 

You need to ideally pay tax on actual profit as per income tax act.

 

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

Thank you.

Naman Maloo
CA, Jaipur
4216 Answers
94 Consultations

5.0 on 5.0

Hey,

 Business/Profession income would be 6% of gross receipts or actual profit whichever is higher. As all the transaction are received digitally . Your service business will come under sec 44AD  . And you have to pay advance tax if your tax liability is more than 10000.

Hope your query is resolved , for further assistance you can also opt for phone consultation . Please give your valuable feedback.

Vaibhav RK
CA, Delhi
24 Answers

Not rated

Based on the information you've provided, it seems that you are eligible to file your tax returns under Section 44AD of the Income Tax Act in India. Here are the key points to consider:

  1. Eligibility for Section 44AD: Section 44AD is applicable to individuals, Hindu Undivided Families (HUFs), and partnerships (other than Limited Liability Partnerships) who are engaged in specified businesses, including professionals. Since you are providing marketing consulting services and are not involved in IT, technical, or engineering services, you should be eligible for Section 44AD.

  2. Taxable Income Calculation: Under Section 44AD, the presumptive income is calculated as 6% of the gross receipts. However, if your actual profit is higher than 6% of gross receipts, you have to declare your actual profit as taxable income. In your case, since you mentioned that your actual profit is more than 80%, you can declare your actual profit as taxable income, which would be more beneficial for you.

  3. Advance Tax: As per Section 44AD, you would be liable to pay advance tax if your total income (including presumptive income) exceeds the threshold limit for advance tax liability. Ensure that you calculate and pay advance tax as per the prescribed schedule to avoid penalties.

In summary, you can opt for Section 44AD and declare your actual profit as taxable income since it's more than 80% of your gross receipts.

 

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

Shubham Goyal
CA, Delhi
90 Answers
2 Consultations

5.0 on 5.0

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