All information about Senior Citizen Savings Scheme (SCSS)

Section 44ADA is a special provision for small professionals.

Under the presumptive scheme of taxation, profits are presumed at 50% of the gross receipts.

The following are some of the key benefits available to professionals who opt for presumptive taxation scheme under Section 44ADA:

• No need of maintaining books required under Section 44AA
• No requirement of having accounts audited under Section 44AB
• Facilitates ease of doing business. Tax form is much shorter and simpler as compared to a complex ITR forms under other sections of the income tax act.
• Reduces compliance burden on small professions. It helps to save money. Tax consultants can charge exorbitant amounts to file tax returns for self-employed individuals due to the complicated filing requirements involved. On the other hand, u/s 44ADA, professionals can file returns on their own due to the simpler ITR form requirements and this can save self-employed professionals a lot of money.

For getting above benefits, professionals have to comply following few conditions:

The following Resident assessees are eligible for the Section 44ADA:

Condition 1

Assessee's status should be -

• Individuals (or)
• Hindu undivided families (HUFs) (or)
• Partnership firms (limited liability partnerships are not eligible)

Condition 2

Assessee's gross receipts should be less than Rs 50 lakh in a year.

Condition 3

Assessee should be an eligible professional who is engaged in any one or more of the following profession:

• Legal
• Medical
• Engineering
• Architecture
• Accountancy
• Technical consultancy
• Interior decoration
• Authorized representatives
• Film Artists
• Certain sports related persons
• Company Secretaries and
• Information technology professionals

Condition 4        

Assessee need to offer presumptive income as Higher of the following:

• 50% of the total receipts from the profession (OR)
• Income from profession offered by the assessee.

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All information about Senior Citizen Savings Scheme (SCSS)

Remember:

(1) If gross income exceeds 50 lakhs limit, the assessee will not qualify for Section 44ADA benefits.

(2) Advance tax payment is required if yearly tax liability exceeds Rs.10,000.

• Such professional who opt section 44ADA benefits, need to pay the entire amount of advance tax on or before 15th March of the financial year.
• If the advance tax payment is not done before the due date, interest under Section 234C is levied.

(3) All deductions for business expenses (including depreciation) are deemed to have been allowed.

• However, the written down value (WDV) of assets for tax purpose shall be calculated as of the depreciation has been allowed each year. This WDV would be the value of the asset for tax purpose in a case where the asset is sold later by the assessee.

Special feature of the Scheme:

In contrast to the restrictions placed on businesses that have opted for the Presumptive Taxation Scheme under Section 44AA, professionals that fall under the Section 44ADA of the Income tax Act can opt-in or opt-out of the scheme at any time. In short, the 5-year restriction applicable to certain types of tax payers is not applicable to them.

Special scenario:

If-

1) Gross receipts from profession are less than Rs. 50 lacks

2) But assessee willing to offer Income from the profession at a lower rate than 50% of the gross receipts

3) And Total income of the assessee is more than the basic exemption limit

Then-

An assessee need to maintain books of accounts u/s 44AA and get the accounts audited under section 44AB

Other Information:

• ITR Form – Taxpayers opting for presumptive taxation under Sec 44ADA should report such income as PGBP Income and file Form ITR-4 on the Income Tax Website.
• They need to mention the specified Business and Profession Codes based on the nature of the profession.
• Also they need to give certain balance-sheet items details in that income tax return.

 

Disclaimer: 

The above article is meant for informational purpose only and does not purport to be advice or opinion, legal or otherwise, whatsoever. While due care has been taken during the compilation of this article to ensure that the information is accurate to the best of our knowledge and belief, the contents of such article do not substitute for professional advice that may be required. The individual expressly disclaims all and any liability to any person who has read this document or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this article.