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Income Tax Return Under Section 44ADA

Section 44ADA of the Income Tax Act provides a simplified tax regime for professionals, allowing them to declare income on a presumptive basis. This tutorial will guide you through the steps to file your company’s Income Tax Return under Section 44ADA.

Filing the Companies Income Tax Return under Section 44ADA is a streamlined process designed to ease tax compliance for professionals. Section 44ADA, under the Income Tax Act, provides a presumptive taxation scheme that allows eligible professionals 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.

Eligibility Verification

First, ensure that your entity is eligible to file under Section 44ADA. This section applies to.

  1. Individuals
  2. Hindu Undivided Families (HUFs)
  3. Partnership firms (excluding LLPs)

The profession must be referred to in Section 44AA(1) and the gross receipts should not exceed ₹50 lakhs in a financial year. Eligible professions include.

  1. Legal
  2. Medical
  3. Engineering
  4. Architectural
  5. Accountancy
  6. Technical consultancy
  7. Interior decoration
  8. Other notified professionals

Income Computation

Under Section 44ADA, the presumptive income is computed as 50% of the total gross receipts of the profession for the financial year. This means if your gross receipts are ₹40 lakhs, your presumptive income will be ₹20 lakhs.

Filing Form ITR-4

Use Form ITR-4 (Sugam) to file the income tax return. This form is specifically designed for those opting for the presumptive taxation scheme under Sections 44AD, 44ADA, and 44AE.

Required Details in ITR-4

You will need to provide the following details in Form ITR-4.

a. General Information: Basic details such as name, PAN, address, and contact information.
b. Gross Receipts: The total gross receipts from the profession.
c. Presumptive Income: The income computed at the prescribed rate (50%).
d. Bank Details: Details of all bank accounts held during the financial year.
e. Verification: The return must be verified by the authorized person.

Books of Accounts and Audit

If you declare your income under Section 44ADA, you are not required to maintain detailed books of accounts. Additionally, no audit is required under Section 44AB.

Advance Tax Payment

For those opting for the presumptive taxation scheme under Section 44ADA, 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

To file your return, follow these steps

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 you are not required to maintain detailed books of accounts under Section 44ADA, it is advisable to keep records of the gross receipts, bank statements, and payment receipts for verification purposes.

Thanks,

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