44AD or 44ADA

Hi guys -

Till an year ago, I used to work as a full time permanent employee for Information Technology firms. Since Jan 2016, I started working on Contract assignments. Jan 2016 to Aug 2016, I was based in New Zealand and worked for a couple of companies there and paid their taxes. In Sep 2016, I returned to India and since Dec 2016, I started working as a Contractor for a US based company, completely remotely. I get paid on a weekly basis directly to my Indian Bank account. They do not deduct taxes and make it the responsibility of the individuals to pay taxes to their government.

I need to pay my taxes and file my returns. Since I am not a permanent employee and have become a contractor, I want to make use of the Presumptive taxation scheme. I am not sure whether I fall under 44AD or 44ADA based on my nature of job. I am a Senior Manager in IT providing Professional Services to my clients. My education is BE Comp. Sci and MBA in Systems and Marketing. My gross receipts for the year would be in the range of 45 to 50L. My expenses for doing this job are rent for small office space, salary for an office assistant, internet, mobile, electricity, stationary and printing, laptop and other accessories like headphones, newspapers, magazines, conferences etc.

Based on this can you tell me, whether I will come under 44AD or 44ADA. Based on that, what ITR number should I fill and submit in the Incometax website?
Also, I want to engage a qualified Tax Consultant (preferably from Bangalore, Chennai or Mumbai) who can advise me on an ongoing basis for a reasonable fee.

Thank you.
Asked 11 days ago in Income Tax from Bangalore, Karnataka
Hi
I can help.you in that. Although i am from kolkata I have many clients across the cities. As all the things are online. Beside income tax you are also liable for GST as well. Let me know if you are interested to take the service 
Vidya Jain
CA, Kolkata
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You can not claim expenses but you can claim 80D, housing loan interest and principal 
Vidya Jain
CA, Kolkata
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Hi,

You can claim the benefit of presumptive taxation under section 44ADA of the Income-tax Act, 1961. Section 44AD is only for business income and not for professionals. Since you provide professional services, you can claim benefit of section 44ADA. Further, you can claim the benefit of section 44ADA only if your gross receipts are less than Rs. 50 lakhs in that year.

To answer your questions:

1. Section 44AD is not applicable to you.

2. Under section 44ADA 50% will be deemed to be your profits. If your gross receipts is Rs. 50 lakhs, then Rs. 25 lakhs will be deemed to be your profit. From this, you can claim deduction available under Chapter VIA i.e. principal repayment of housing loan, medical insurance premium, life insurance premium, investment in PPF, tax-saving FD, etc. The net amount will be your taxable income, on which tax payable as per the slab rates.

3. Yes, you can claim such deductions..

You will have to fill ITR-4 if you are claiming benefit of presumptive taxation.

You can contact any professional registered on this portal. Fees would vary depending upon the CA and the complexity of the work involved.

Trust this clarifies.

Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
Keerthiga Padmanabhan
CA, Greater Mumbai
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Hello Mr. Dhinakar,

I still have not understood your business model hence it is very difficult to comment if you fall under 44AD or 44ADA but based on a cursory look it appears that you fall under 44ADA and hence 50% of your receipts shall be subject to tax.

Yes, you can claim benefit u/s 80U if you have a medical certificate stating so.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP
Rohit R Sharma
CA, Mumbai
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Hi Dhinkar,

The limit for 44ADA is 50 lacs. You will have to file ITR 3 if your turnover exceeds 50 lacs. 

Yes, you will be eligible to claim deduction u/s 80U.

Please feel free to call/ revert in case you need more clarity

Thanks and regards
Abhishek Dugar
CA CS B.Com
Abhishek Dugar
CA, Mumbai
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Hi,

Limit for 44AD is 2Crore and 44ADA is 50 Lacs. 

It depends as to which category you fall into. In case, your gross receipts are more than 50 Lacs and you are a professional then you should have got your books of accounts audited before 30th September 2017 which was later on extended to 07th November 2017.

Trust this clarifies.

Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
Keerthiga Padmanabhan
CA, Greater Mumbai
656 Answers
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