Hello,
can we use 44AD ? if not, what options do we have for maximum tax benefits:
Firm type : Sole Proprietorship
Registered office: Mumbai, India
Nature of business: Provide IT support services to 1 US based client
Place of Supply: Outside India
Number of employees: owner + 1 (may hire few more soon)
Revenue in FY 25-26 : 26 Lakh
Future Revenue per month : ~ 20,000 USD (about 16-18 Lakh INR)
100% revenue via brank transfer
Expenses : not much (1 employee salary is 60k per month)
Commencement date: 10 Jan 2026
Udyam and shop act registration : 6 March 2026
GSTIN received : 18 March 2026
LUT filed : 19 March 2026
invoices raised: 20 March 2026
First Payment received : 2 April 2026
NIC code in Udyam : 62099 (Other information technology and computer service activities)
SAC code in invoices: 998314 (IT design and development services)
Purpose code used for remittance: P0802: Software consultancy, implementation, and IT services.
MSA (Contract) is generic and SOW has name of the employee as the contact person, but we will have more few employees provide services to that client
The question is mainly about FY 26-27, we want to do everything right from the beginning, make any changes now to maximize tax benefits. also want to file IT returns for FY 25-26 under the right scheme for consistency (even if revenue was only about 26L).
details from SOW:
Project Description: Provide DBA/PowerShell services to Simba's customer XYZ inc
Services: Database Administration (DBA)
● Installation, configuration, and maintenance of database systems
● Database performance monitoring, tuning, and optimization
● Backup, restore, and disaster recovery planning and execution
● High availability and failover configuration (clustering, replication,
Always On, etc.)
● Database security management (roles, permissions, encryption,
auditing)
● Patch management and version upgrades
● Capacity planning and storage management
● Troubleshooting database errors and performance issues
Database Development & Support
● SQL query optimization and indexing strategies
● Stored procedure, function, and view development
● Data integrity and validation checks
● Schema design and database normalization
● Support for application releases and database deployments
● Data migration and upgrade support
PowerShell Automation
● Development of PowerShell scripts for database administration tasks
● Automation of backups, restores, and maintenance jobs
● Automated health checks and monitoring scripts
● Job scheduling and task orchestration
● Automated user and permission management
● Scripted database deployments and rollbacks
Consultant(s): Dinesh P
Services Milestones: As defined by Elgin White from time to time
Deliverables: As defined by Elgin White from time to time
SOW Term : 15th January 2026 to 14th January 2027 or such alternative dates
as may be agreed
Asked 20 days ago in Income Tax
Thanks Shubham!
Vidya, Naman - it seems you did not read the full post. expected revenue in FY 26-27 will be around 2 CR (16-18L per month), so 44ADA will not be applicable.
ChatGpt (AI tool) says : 44AD is applicable because: A) yours is business not an individual (owner is a lawyer, all work is being done by employees. B) you are providing IT services as a business/trade, not as a "profession".
It provided following court cases in support where IATA upheld use of 44AD (even when TDS was deducted under 194J by the client):
1. Educe Consulting, Surat v. ITO (ITAT Surat, May 2024)
2. Vishnu Dattatraya Ponkshe v. CPC (ITAT Mumbai, 29.08.2023)
I don't trust AI tools fully (hence asking question here) but do those cases support use of 44AD in our case?
Thanks in advance!
Asked 19 days ago
