Filing the Companies Income Tax Return under Section 44AD is a streamlined process designed to simplify tax compliance for small businesses. Section 44AD, under the Income Tax Act, provides a presumptive taxation scheme that allows eligible businesses to declare their income at a prescribed rate, reducing the burden of maintaining detailed accounts and undergoing audits. This guide outlines the eligibility criteria, income computation, and step-by-step procedure to file the return using Form ITR-4, ensuring compliance with the tax regulations while leveraging the benefits of this simplified scheme.
To file the Companies Income Tax Return under Section 44AD, follow these detailed steps.
Eligibility Verification
Ensure the company’s eligibility to file under Section 44AD. This section generally applies to individuals, Hindu Undivided Families (HUFs), and partnership firms (excluding LLPs) engaged in any business except.
a. Businesses involved in plying, hiring, or leasing goods carriages as referred to in Section 44AE.
b. Agency businesses.
c. Businesses earning income in the nature of commission or brokerage.
d. Businesses with total turnover or gross receipts exceeding ₹2 crores in a financial year.
Income Computation
Under Section 44AD, the presumptive income is calculated as 8% of the total turnover or gross receipts of the business for the financial year. If the turnover or gross receipts are received through digital transactions, the presumptive income can be declared at 6%.
Filing Form ITR-4
Use Form ITR-4 (Sugam) for filing the income tax return. This form is designed for individuals, HUFs, and firms opting for the presumptive taxation scheme under Sections 44AD, 44ADA, and 44AE.
Required Details in ITR-4
a. General Information: Include basic details such as name, PAN, address, and contact information.
b. Gross Turnover or Receipts: Declare the total turnover or gross receipts from the business.
c. Presumptive Income: Compute the income based on the prescribed rate (8% or 6%).
d. Bank Details: Provide details of all bank accounts held during the financial year.
e. Verification: Ensure the return is verified by the authorized person.
Books of Accounts and Audit
There is no requirement to maintain detailed books of accounts under Section 44AD if income is declared at the presumptive rate. Additionally, no audit is required under Section 44AB if income is declared under Section 44AD.
Advance Tax Payment
For those opting for the presumptive taxation scheme under Section 44AD, the entire amount of advance tax must be paid by 15th March of the financial year. Failure to pay advance tax by this date will attract interest under Section 234C.
Filing the Return
a. Visit the Income Tax e-Filing website.
b. Log in using your PAN and password.
c. Select “File Income Tax Return” and choose the relevant assessment year.
d. Select the applicable ITR form (ITR-4) and complete the required details.
e. Submit the form and e-verify the return using methods such as Aadhaar OTP, net banking, or EVC (Electronic Verification Code).
Document and Record Maintenance
While maintaining detailed books of accounts is not mandatory, it is advisable to keep records of the turnover, receipts, bank statements, and payment receipts for verification purposes.