[Jaguar]

Originally Posted by MyLife_MyCar

Hello esteemed CAs in the forum, I seek your guidance on TDS filing for a joint property purchase (> 50L).

Again, kindly remember that the first instalment was paid entirely by father-in-law via RTGS through bank branch.

This is what I did. It was a ready-to-occupy property with me and my mom as the co-owners. The down payment was transferred from our joint account and the remaining as a loan in my name. I submitted TDS by showing the property value as 50% in each of our names.

If I remember correctly, the form calculates the TDS based on the property value entered. So if each person enters the full property value, you would end up paying double the TDS.

[MyLife_MyCar]

Originally Posted by Jaguar

If I remember correctly, the form calculates the TDS based on the property value entered. So if each person enters the full property value, you would end up paying double the TDS.

For me, the form isn’t calculating TDS amount automatically. I have to manually enter it. Could it be an issue with the website?

[Jaguar]

Originally Posted by MyLife_MyCar

For me, the form isn’t calculating TDS amount automatically. I have to manually enter it. Could it be an issue with the website?

Not sure, it could be anything. You could try a different browser. Better to check with a CA who does this regularly.

[Guite]

To the respected CAs in the forum I have a question regarding presumptive taxation for professionals. After reading through few websites, it seems expenses do not have to be recorded and declared, and income tax is to be paid on 50% of receipts. However, a CA told me I have to maintain book of accounts and pay tax on actual profit. Clarification on these points will be highly appreciated.

On related note, if I do not opt for presumptive taxation, what are the head of expenses I can claim? Please note I am operating as an individual consultant.

[mtripathi13]

Originally Posted by Guite

To the respected CAs in the forum I have a question regarding presumptive taxation for professionals. After reading through few websites, it seems expenses do not have to be recorded and declared, and income tax is to be paid on 50% of receipts. However, a CA told me I have to maintain book of accounts and pay tax on actual profit. Clarification on these points will be highly appreciated.

On related note, if I do not opt for presumptive taxation, what are the head of expenses I can claim? Please note I am operating as an individual consultant.

Dear Guite
Avery very pertinent question. I have noticed many incorrect interpretations of presumptive taxation (44AD/44ADA) in my everyday practice and also in this forum threads. So, I am answering your questions for the benefit of other members as well.

1. If you carefully read the provisions of both these sections, you will notice the words “ a sum higher than the aforesaid sum claimed to have earned by the assessee” used in respect of the income to be offered under both these sections.
2. What implies is that, the intent of the law or legislation is to tax the minimum 6%/8% or 50% or “a sum higher than the aforesaid sum claimed to have earned by the assessee”. So, if the assessee has earned more than the specified percentages, he has offer the same for taxation. Period.
3. The CA is absolutely correct, the records need to maintained, otherwise how would one arrive at a profit/sum higher than the specified rate. You need to maintain records of everything, only exemption is you need not report the entire P/L or Balance Sheet in your ITR-3. You can report only a few details as required in the form. But you have to pay and report the actual profit, no two questions on this fact.
4. If you do not intend to use 44ADA, every business expense used to generate the income is an allowable expense. It has to justified in case scrutiny arises.
5. One thing is very important, in case of Profession and gross receipts below 50L/75L and the offered income is below 50%, mandatory Tax audit is needed. Kindly keep this in mind.

I hope I have been able to clear a few doubts of yours.

Warm Regards
Manish

[jinojohnt]

Requesting help from CAs:
If the TCS is not reflected in Form 26AS within a month after car purchase (within 15th of the subsequent month), what is the general course of action?

[Guite]

Hi Manish, thanks for the response.

Originally Posted by mtripathi13

“a sum higher than the aforesaid sum claimed to have earned by the assessee” used in respect of the income to be offered under both these sections.

A relative have sent me full official text of this section. The part before your quoted text is "...a sum equal to fifty percent of the total gross receipts..."

What implies is that, the intent of the law or legislation is to tax the minimum 6%/8% or 50% or “a sum higher than the aforesaid sum claimed to have earned by the assessee”. So, if the assessee has earned more than the specified percentages, he has (to) offer the same for taxation. Period.

The word "OR" is not there in the official document, which in itself is very confusing. All websites I have read on this topic mentioned that the intent of this section is to make taxation simple and easy to comply with, so no book of account required. I contacted another CA familiar with the matter, he said no book of accounts, straight 50%. So I am still on the research path.

[mtripathi13]

Originally Posted by Guite

Hi Manish, thanks for the response.

A relative have sent me full official text of this section. The part before your quoted text is "...a sum equal to fifty percent of the total gross receipts..."

The word "OR" is not there in the official document, which in itself is very confusing. All websites I have read on this topic mentioned that the intent of this section is to make taxation simple and easy to comply with, so no book of account required. I contacted another CA familiar with the matter, he said no book of accounts, straight 50%. So I am still on the research path.

Dear Guite
1. The full text of the section does contain the word ‘or’. Even in the image attached by you it is evident. I am marking the same and attaching the image again.

2. Regarding websites, please take the articles with a bucket full of salt. Taking decisions on the basis of website articles is akin to getting medicine on the basis of diagnosis by google. A lot of technical inconsistencies are found in website articles, and for legal interpretation they are not recommended at all. If you wish to read on the subject, do visit website of good publishers like Taxmann, search the book, review the credentials of the author, buy the same and then interpret the law.

3. The interpretation of the second CA is, to put it mildly, childish. A simple download of the study material of CA Final course from the website of ICAI and study for half hour should clear the cobwebs in his mind. No logical mind can interpret that the law does not want to tax the actual profits.

4. Making taxation simple doe not mean to ‘not’ tax the actual profits. Various other procedural benefits are there in presumptive taxation.

5. As evident from my profile, I am a practising CA. I have always opted for 44ADA. And not once have I offered exactly 50% of the receipts. The actual profits have always been offered or tax audit done. This is a statement of fact and you can draw your own conclusions.

6. I am certain of my interpretation. However, there is the other side as well. You are free to choose whatever you feel like. Always keep in mind that, it is you, who will have to bear the consequences of the choice. No advisor or professional will bear the consequences. So, choose wisely.

7. This is my last post on this topic, as I have nothing more to add.

Best of Luck. Warm Regards
Manish

[Guite]

Dear Manish,
I didn't mean to antagonise you. I am just looking for clarity on some doubts that I have.

Originally Posted by mtripathi13

Taking decisions on the basis of website articles is akin to getting medicine on the basis of diagnosis by Google.

I believe Cleartax, Taxbuddy, Groww, etc provide professional consultancy. Moreover, medical consultancy is totally different because clinical examination of the patient is crucial to correct diagnosis.

There are other points that I would have liked to respond. However, let me just conclude by saying that I have got my answers from an Income Tax Officer (ITO), who explained to me about section 194J and section 44ADA. This response has been validated with multiple tax payers as well. This topic is closed from my side too.

[mtripathi13]

Originally Posted by Guite

Dear Manish,
I didn't mean to antagonise you. I am just looking for clarity on some doubts that I have.

I believe Cleartax, Taxbuddy, Groww, etc provide professional consultancy. Moreover, medical consultancy is totally different because clinical examination of the patient is crucial to correct diagnosis.

There are other points that I would have liked to respond. However, let me just conclude by saying that I have got my answers from an Income Tax Officer (ITO), who explained to me about section 194J and section 44ADA. This response has been validated with multiple tax payers as well. This topic is closed from my side too.

Dear Guite

Trust me I did not feel antagonized at all. On the contrary, if my choice of words has made you uncomfortable, please accept my sincerest regret.

Since you have quoted a part of my reply on medical advice, let me try to put a little context. We have a doctor in our immediate family. You will be surprised, how often, in his practice, he comes across parties who have already researched their disease and have also arrived at the treatment. The visit to doctor is just to affirm their research. They feel disappointed if the doctor does not prescribe the antibiotics which they have read about.

Similarly, I have also faced clients who come with printouts from ***tax, ***guru etc. They have already made up their mind, based on these articles. I just have to affirm their understanding. During those times I sincerely feel that I have wasted my life in studying and passing one of the hardest exams in India.

So, the analogy came from these experiences. I regret if you found it unpleasant.

Does that mean that these websites, who are doing brisk business are always wrong or are their articles not useful at all? No, absolutely not. They can be used for general guidance. But there are many inaccuracies, which people like us, who are professionals might notice. Other persons will not notice these and hence for them the print in gospel. Therein lies a problem.

It further appears that you found my other points worth responding to, but have refrained. With due respect, I stand by firmly on the points that I have written. They might me a little harsh, but I have an unequivocal and absolute right to air my views, which are entirely based on my experiences.

Similarly, you too have an unequivocal and absolute right to disagree with me or treat my views as junk. It is absolutely your prerogative.

I would have loved to have discussed further, especially about 194J and its correlation with 44ADA, but let us keep that for another day and end the discussion.

Warm Regards
Manish

[Rajesh V]

I'm a CA Final student and as such I'm still learning about this.

My current understanding on the matter is that u/s 44ADA you're exempt from maintaining books of accounts if your claimed profits are 50% of your receipts or higher.


The 'higher' portion was inserted only to give an option for honest citizens looking to contribute to nation building and not mandate an exact 50% profit. But as long as it's atleast 50%, your rate of profit cannot be questioned.

[mtripathi13]

Originally Posted by Rajesh V

I'm a CA Final student and as such I'm still learning about this.

My current understanding on the matter is that u/s 44ADA you're exempt from maintaining books of accounts if your claimed profits are 50% of your receipts or higher.

The 'higher' portion was inserted only to give an option for honest citizens looking to contribute to nation building and not mandate an exact 50% profit. But as long as it's atleast 50%, your rate of profit cannot be questioned.

Dear Rajesh

Let us envisage a situation. Say I am a CA. I have earned 20 lacs as fees. After setting aside all expenses, I am able to see that my profit is 15 lacs. So, what should I do? Let us say I offer income as 10 Lacs (50 percent) and pay tax on it. Now kindly tell me about the status of the 5 lacs, which remain with me in cash/bank/assets. Is it unexplained asset/income or not? Let us think What happens in normal course. If your assets cannot be explained by your reported income are they considered illegal or not.? I will not answer the question and leave you to ponder.

Now if something is illegal in normal parlance, can it be legal through any special provision of law.

Let us take the example to another extreme. A high paying lawyer who earns in crores, can he just offer 50 percent of his fees as income even though the actual income is way over the limit and keep the differential in bank/asset and expect the tax authorities to accept the same. What do you think?

Please bear in mind the 'or' is not optional. It is the intent of law.

Regards
Manish

Rajesh, since you are a student I wont try to confuse you, but even if you opt for 44ADA, you need to maintain books. Let me summarize :

Maintenance of books of accounts and audit:
A very interesting issue is that whether a professional who has opted presumptive system of taxation has to maintain books of account also. To resolve this issue firstly we have to see the provisions of section 44AA(1) of the Act .

Section 44ADA overrides section 28 to section 43C but does not override section 44AA. Section 44AA(1) provides for compulsory maintenance of books of accounts by a person carrying on specified profession. Further, section 44ADA can be opted only by a person carrying on a specified profession in section 44AA(1). Therefore, on the plain reading of the law, it appears that it is mandatory for a person carrying on a specified profession as per section 44AA(1) has to compulsorily maintain books of accounts even if such a person declares his income as per section 44ADA(1).

If this interpretation is invoked, then the purpose of simplification will get defeated. The purpose of introducing the presumptive taxation is to provide relief to small taxpayers from the burden of maintaining the detailed books of account and reducing the cost of compliances.
The memorandum to Finance Bill 2016 states that in order to rationalize the presumptive taxation scheme and to reduce the compliance burden of the small taxpayers having income from profession and to facilitate the ease of doing business, it is proposed to provide for presumptive taxation regime for professionals. It further states that the assessee will not be required to maintain books of account under sub-section (1) of section 44AA and get the accounts audited under section 44AB in respect of such income unless the assessee claims that the profits and gains from the aforesaid profession are lower than the profits and gains deemed to be his income under sub-section (1) of section 44ADA and his income exceeds the maximum amount which is not chargeable to income-tax.

Further, the ‘FAQs on Tax on Presumptive Taxation Scheme’ published on income tax portal clarifies the same in the following manner- 110

If a person adopts the presumptive taxation scheme of section 44ADA, then he is required to maintain books of account as per section 44AA?
In case of a person engaged in a specified profession as referred in sections 44AA(1) and opts for presumptive taxation scheme of sections 44ADA, the provision of sections 44AA relating to maintenance of books of account will not apply. In other words, if a person opts for the provisions of sections 44ADA and declares income @50% of the gross receipts, then he is not required to maintain the books of account in respect of the specified profession.

Even though the FAQ is not the law but still it can be an aid to interpretation on the issue. This view shall further fortify from the speech of the Finance Minister. In the Budget Speech of the then Finance Minister while presenting the Union Budget 2016 stated as follows-

“At present about 33 lacs small business people avail of this (presumptive taxation scheme under section 44AD) benefit, which free them from the burden of maintaining detailed books of account and getting audit done.
I also propose to extend the presumptive taxation scheme to professionals with gross receipts up to Rs.50 lacs with the presumption of profit being 50% of the gross receipts.”

From the speech, it is also suggested that professionals opting the presumptive taxation scheme with gross receipts up to Rs.50 lacs with the presumption of profit being 50% of the gross receipts are not required to maintain books of accounts.

The legislative intent is very clear that such a professional is not required to maintain books of account under section 44AA. Although, it can be said that when the plain meaning of the words of the statute is unambiguous, there is no need to resort to external aid for interpretation. However, one should not forget that it is a beneficial provision provided to small taxpayers and hence is required to be interpreted liberally.

From the perusal of above section, it is clear that it is mandatory for the professional who is covered under Section 44ADA to maintain books of accounts even though he has opted for the presumptive taxation scheme. Although, the Memorandum to the Finance Bill, 2016 provides that an assessee opting for Section 44ADA would not be required to maintain books of account under Section 44AA(1), the same has not been brought out clearly in the Section 44AA. Section 44AA is silent in relation to the assessee who is covered by Section 44ADA. Moreover the provisions of Sec 44ADA overrides sec 28 to 43C and not sec 44AA of the Act. Hence, on combined reading of 44AA(1), 44AA(3) read with Rule 6F, the specified professionals would need to maintain books of account even if they opt for section 44ADA.

[Rajesh V]

Thanks a lot for your detailed explanation Mr. Tripathi.

Your hypothetical situation had given me a pause. But after some thought, I've concluded that actual transactions won't be so black and white unless you maintain detailed books of accounts. And keeping in mind the turnover made, the holdings of a person should be admissible when under question especially since they can also be considered as assets held for the purpose of the profession. As for somebody earning in crores, they are ineligible to opt for 44ADA for this very reason, no?

The 'or' is indeed not optional, but the act requires one to 'claim' such higher amount to have been earned which should be giving it a voluntary nature, no?

And I'm sorry, but I'm unable to identify anything (other than the paragraphs in bold) that suggests maintainance of books being necessary in your summary (which appears AI generated and not allowed here), and would've concluded that you were advocating non-maintenance of books if not for the paragraphs in bold which themselves don't have any explanations. Wouldn't section 44ADA(4) implicitly mean that 44AA(1) wouldn't apply otherwise?

I don't understand your underlying stance of books being required and not detailed books. But if one is to identify their actual profit/loss, they absolutely need detailed records including BS and PL. I don't see how it can get any more detailed. This would make the entire 44AD and ADA sections moot.

[mtripathi13]

Originally Posted by Rajesh V

Thanks a lot for your detailed explanation Mr. Tripathi.

Your hypothetical situation had given me a pause. But after some thought, I've concluded that actual transactions won't be so black and white unless you maintain detailed books of accounts. And keeping in mind the turnover made, the holdings of a person should be admissible when under question especially since they can also be considered as assets held for the purpose of the profession. As for somebody earning in crores, they are ineligible to opt for 44ADA for this very reason, no?

The 'or' is indeed not optional, but the act requires one to 'claim' such higher amount to have been earned which should be giving it a voluntary nature, no?

And I'm sorry, but I'm unable to identify anything (other than the paragraphs in bold) that suggests maintainance of books being necessary in your summary (which appears AI generated and not allowed here), and would've concluded that you were advocating non-maintenance of books if not for the paragraphs in bold which themselves don't have any explanations. Wouldn't section 44ADA(4) implicitly mean that 44AA(1) wouldn't apply otherwise?

I don't understand your underlying stance of books being required and not detailed books. But if one is to identify their actual profit/loss, they absolutely need detailed records including BS and PL. I don't see how it can get any more detailed. This would make the entire 44AD and ADA sections moot.

Dear Rajesh

Yes, I should not have used the word crore. As in that case presumptive taxation will not be available. But my logic holds even if you bring the threshold to say 50l/75Lacs.

Assets not backed by income are not legal. And you need to offer actual profit. And for the purpose, detailed books has to be maintained, so as to arrive at the said actual profit. It is not voluntary.

In respect of the portion that has been reproduced here, they are actually from an article which I have written for some other purpose. I have simply copy pasted the relevant part it, so appears to be from AI.

Now, if I have confused with the said texts, I will summarize in few lines:

1. The memorandum of finance act 2016 and finance minister speech says books are not required to be maintained.

2. The income tax FAQ says the same thing.

3. Both of these point toward giving relief to taxpayers by allowing non-maintenance of books. But the problem is, both of them are not 'laws'. Law is the Act.

4. The dichotomy is that for professionals books maintenance is covered by 44AA. And the legislature in its wisdom has not cared to amend the said section

5. So even if the intention is to give relief, the section where the relief has to be given is not changed. The law remains unchanged.

6. Lastly, please read the section itself, It starts with a notwithstanding clause. It overrides section 28 to 43, but it does not override 44AA.

7. In conclusion, for professionals 44AA applies, even if you opt for 44ADA.

I hope I have been able to explain the same. No AI is involved here.

Regards
Manish

[Rajesh V]

Ah, now I perfectly understand your perspective sir. Thank you for your patience. This has indeed been an eye-opener.

But I still can't understand the existance of 44AD and 44ADA if that were the case.