Understanding Tax On Presumptive Basis Under Income Tax Act

MCQ SELF CHALLENGE #0087

Tax On Presumptive Basis Under Income Tax Act

Dear Professional Seniors & Friends,

Warm Greetings!

After getting a wonderful responses based on the previous challenge, our tax consultant in Gurgaon are ready to introduce another MCQ on tax on a presumptive basis under the Income Tax Act in a unique manner to be self-answered by participants. The detailed answers to these MCQs shall be posted the next day for the self-assessment of the participants.

MCQ 87.1: The presumptive taxation scheme of section 44AD cannot be adopted by

A. Resident Individual

B. Resident HUF

C. Resident Partnership Firm

D. Limited Liability Partnership Firm

MCQ #87:2: In case of a person adopting the provisions of section 44AD Income will be computed on a presumptive basis. Le. 6% of the turnover or gross receipts of the eligible business for the year if turnover/gross receipt is received by an account payee cheque or an account payee bank draft or use of an electronic clearing system through a bank account during

A. The previous year

B. Before the due date of filing of return under section 139(1)

C. Any time During the Assessment year

D. Both A & B.

Answer MCQ Self Challenge #0087

This post of MCQ is on provisions relating to Tax On Presumptive Basis under the Income Tax Act.

Answer MCQ 87.1:

D) Limited Liability Partnership Firm

Answer MCQ 87.2:

Dj Both A & B

Practical Analysis for MCQ 87.1 & 87.2

• The presumptive taxation scheme of section 44AD is designed to give reset to small taxpayers engaged in any business (except the business of plying, hiring, or leasing of goods damages referred to in section 44AE). The presumptive taxation scheme of section 44AD can be adopted by the following persons

11 Resident Individual

2) Resident Hindu Undivided Family

3) Resident Partnerships Firm (not Limited Liability Partnership Firm)

• In other words, the scheme cannot be adopted by a non-resident and by any person other than an individual HUF, or a partnership firm (not a Limited Liability Partnership Firm). This scheme cannot be adopted by a person who has made any claim towards deductions under section 10A/10AA/108/10BA or under sections 80HH to BORRB in the relevant year.
• In order to promote digital transactions and to encourage small unorganized businesses to accept digital payments, section 44AD is amended with effect from the assessment year 2017-18 to provide that income shall be computed at the rate of 6% instead of 8% if turnover/gross receipt is received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date of filing of return under section 139(1),

On the Basis of the Above Analysis Correct Answer to MCQ 87.1-D) Limited Liability Partnership Firm and Correct Answer to MCQ 87.2: Dj Both A&B

(Disclaimer: The objective of the MCQ post is just to discuss the concept it may happen, by change of facts, the answer may be different. Please do not treat this as professional opinion, you can definitely have your own opinion)

Sincere Regards!

CA Sanjay Kumar Agarwal

Mobile: 9610116321