| Question And Answer | |
|---|---|
| Subject: | Presumptive Income under section 44AD of the Income tax Act 1961 how many years the assessee can continue ? |
| Category: | Income-Tax |
| Querist: | Rahul Pathak |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Presumptive Income, presumptive taxation scheme |
| Date: | June 6, 2021 |
Individual or HUF who opt for Presumptive Income under section 44AD, is he continued till turnover not exceed as prescribed by law or he will continue for only five years from the date of first year when he opt for Presumptive Income.
As per the explanatory notes to the Provisions of the Finance Act, 2016, where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five consecutive assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of this section, he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of this section. For example, an eligible assessee claims to be taxed on presumptive basis under section 44AD for Assessment Year 2017-18 and offers income of Rs. 8 lakh on the turnover of Rs. 1 crore. For Assessment Year 2018-19 and Assessment Year 2019-20 also he offers income in accordance with the provisions of section 44AD. However, for Assessment Year 2020-21, he offers income of Rs.4 lakh on turnover of Rs. 1 crore. In this case since he has not offered income in accordance with the provisions of section 44AD for five consecutive assessment years, after Assessment Year 2017-18, he will not be eligible to claim the benefit of section 44AD for next five assessment years i.e. from Assessment Year 2021-22 to 2025-26.
Therefore, it does not mean the provisions relating to presumptive taxation are restricted to 5 years.