Defective return
Hello Everyone I have started a very small business of Software development in 2016. Number of headcounts in my business is 2 including myself. So I filed my income tax return form (ITR4s) for 16-17 Online. At the time of filling form ITR4S I had selected "Software development agencies (code 0711)" under Nature of Business section and filled my income details under "44AD" But after some days I got an email regarding defect in ITR filling. The defect mentioned in mail is... Error Description:- "As per Section 44AD(6) of the Income Tax Act, 1961, the provisions of Sec.44AD are not applicable to – (1) persons carrying on professions that are referred to in Sec.44AA(1), (2) persons earning income in the nature of commission or brokerage, and (3) persons carrying on any agency business.As seen from the return of income filed, the nature of business code mentioned is 00711 Software development agencies, which falls in the categories mentioned above. Hence, the provisions of Sec.44AD are not applicable, in your case." Probable resolution:- "As the provisions of Section 44AD are not applicable, in your case, the claim of computing profits and gains of business on presumptive basis, under this special provision is not allowable. Hence, the above defect has to be corrected by way of computing the profits and gains of business under the normal provisions and not under Sec.44AD and offering the same." As I understand Sec 44AD is not applicable for my business (Software development agency.) I reopened the form ITR4s and found that there are only two options for filling income details and that are 44AE and 44AD. My questions are:- 1) How can I fill my profit and gain details under the normal provisions as mentioned in resolution as there are only two available option in ITR4s (44AE and 44AD) 2) Have I filled the wrong form ? 3) If I filled wrong form can I filled correct form again ?
1. You can opt for presumptive taxation under Section 44ADA wherein 50% of yoir professional income shall be chargeable to income tax.
2. Use ITR 3.
3. Yes. Return can be revised. Make sure you do file it correctly this time. Better take an assistance. We may help you in this.
CA Lakshita Bhandari
hii
You have to file ITR3 or can use 44ADA instead of 44AD coz professionals can file his ITR showing 50% or above as profit if his Turnover/receipts is equal to or less than 50 Lakhs.
@Abhishek_Dugar Sir...Yes I am a software developer and own a small business of software developer agency as I mentioned above. My income is from my business only. So should I fill ITR4 or ITR3 ? @Lakshita_Bhandari Ma'am Please clarify one thing. When I go to download ITR utility page in https://incometaxindiaefiling.gov.in/. There are description of all available ITR. Such as ITR3 :- For Individuals/HUFs being partners in firms and not carrying out business or profession under any proprietorship ITR4:- For Individuals/HUF having income from a proprietary business or profession ITR4S:- For Individuals/HUF/Partnership Firm having income from presumptive business According to these description I thought I have to fill ITR4 because my income is from my business. Can you please explain ?
Your return period is FY 16-17 (AY 17-18) right?
Please choose the correct AY for downloading correct forms.
My return period is FY 16-17 (Income from 1st April 2016 to 31st March 2017). So I have to select AY17-18 or AY16-17 ? Sorry I am first timer.
AY 17-18.
But now, when you have filed return for AY 16-17 also. You'll have to revise return for AY 16-17 and file a new return for AY 17-18.
It's always advisable to get your returns filed by a professional. Changes in returns by revising come easily under scrutiny.
Hi,
You have an option to choose from ITR 3 or ITR 4. If you are not maintaining proper accounts, you can file ITR 3 using presumptive taxation provisions.
Oh God :( But my business started in May-2016. It means I am not eligible for AY16-17. So how can I revise it ? Can I still file a new ITR for AY17-18 as due date has already gone.
For AY 17-18, you may file a belated return now.
For AY 16-17, it has to be revised, show some other incomes like bank interest.
Hi
I think there is a lot if confusion.
Why are you worried about AY 2016-17.
You have received defective notice for AY 2017-18. Yes, you can file return for AY 2017-17 even if the date has gone.
If you still have confusion, I recommend you to take a phone consultation.
@Abhishek_Dugar No Sir... I received defective notice for AY16-17. Now as I understand I have to do 2 things. 1) I have to fill revised return for AY16-17 by showing some other incomes as @Lakshita ma'am suggested. 2) I have to fill a new return (ITR3) for AY17-18. One last question about filling ITR3 for AY17-18 Should I have to select "12-After the due date under section 139(u/s 139(4))" in "Under Section" column ?
Yes. 12-After the due date under section 139(u/s 139(4))
Hi,
Yes, You need to select 139(4).
Make sure you don't make any mistake because this can't be revised.
for AY 2017-18 you have to file ITR3 or can use 44ADA instead of 44AD coz professionals can file his ITR showing 50% or above as profit if his Turnover/receipts is equal to or less than 50 Lakhs.
while filling select this opeiotn "12-After the due date under section 139(u/s 139(4) in both cases
Hello,
1. You can ignore your previous years return i.e A.Y. 2016-17 as it has already turned defective and rejected by the department.
2. You will have to file ITR - 3 for AY 2017-18 and select After the due date of filing returns.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
As you started your business in Sept 2016 only, the income earned during the period from Sept 2016 to March 2017 only will be the income to be considered for the Financial Year 2016-17. The corresponding assessment year for FY 2016-17 is 2017-18. You can file belated return by selecting the option 12- After the due date.
As regards the defective return for the asst year 2016-17, you do not have any income during this year. Hence, you do not need to file any return, unless you have any TDS . If not, then you need not take any action, as the return is already considered as defective. The return will automatically become invalid.
Hi,
You will have to fill ITR-3 for AY 2017-18 (i.e. FY 2016-17). You have to select the option "After the due date under section 139".
I understand all your other questions have been answered.
Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
