ITR filing: How income tax outgo becomes half for consultants

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ITR filing: If you are working as a freelancer or consultant who is engaged in certain specified professions and has total gross receipts not exceeding ₹50 lakh in a financial year then there is some good news for you. The eligible professionals ​​can pay tax on half of their annual gross income. This can be done by opting for a presumptive taxation scheme of the Income Tax Act.

As per the Income-tax Act, a person engaged in business or profession is required to maintain regular books of account and further, he has to get his accounts audited. Maintaining books of account is not an easy task and becomes difficult work for small taxpayers. To relieve them of this tedious work, the Government started a scheme of presumptive taxation. This scheme is incorporated in Section 44AD, Section 44ADA of the Income Tax Act 1961.

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In a tweet, CA Ameet Patel said that sections 44AD and 44ADA are the most misunderstood and misused sections.

“Under Section 44AD of the Income Tax Act, small taxpayers with a total turnover or gross receipts of up to ₹2 crore ( ₹2,00,00,000) in a financial year are eligible to opt for the presumptive taxation scheme. As per this scheme, such taxpayers are not required to maintain detailed books of account. Instead, their profits are presumed to be 8% of their total turnover," said Abhishek Soni CEO and Co-founder Tax2win.

However, there's a special provision that if the taxpayer receives payments through digital means or banking channels, the presumptive profit rate is reduced to 6% of the turnover instead of 8%. This measure aims to promote digital transactions and discourage the use of cash, he added.

Section 44ADA is specifically