Section 44AD

Sub section 2 of section 44AD says that Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed. which means that depreciation u/s 32 has already been allowed. You dont need to maintain books doesnt means that you dont have to calculate any figure every one who is doing a business should maintain a rough profit and loss account in which he calculate his profit and loss. Section 44AD says that if you file your return of income under 44AD you are free from maintaining proper books of accounts as mentioned in 44AA. You can easily find by every year making a balance sheet and writing wdv or balance of all your accounts, if you cant maintain bills for 10-12 years and in 10-12 years any asset value will be near to zero.

You must maintain basic profit and loss and balance sheet through which you can derive your profit.

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Thank you.

Hello,

Under Section 44AD, An assessee is not required to maintain any books of account and compute presumptive income at 6% or 8% of gross receipts or turnover of the eligible business for the previous year. 

Assessees willing to adopt the provisions of Section 44AD are not permitted to claim a deduction of expenditures including depreciation and unabsorbed depreciation.

Though deductions on account of depreciation and unabsorbed depreciation are not available, it is necessary to calculate the depreciation for the purpose of computation of written down value of an asset used for business. Therefore it would be required that depreciation is calculated and deducted for the computation of the written value of the particular asset.

I hope this answer satisfies your requirement.

Regards,

CA Hunny Badlani

Hi,

- If you are opting for the presumptive scheme of taxation u/s 44AD then there is no need of maintenance of books of accounts. You can maintain them for your own purpose if in future either you become ineligible for 44AD or you don not opt it voluntarily. 

- 44AD says 6%/8% of the gross receipts or the actual profit whichever is higher. For calculation of actual profit, you should deduct depreciation. For calculating opening WDV, you need cost and date of purchase of capital assets. No notional depreciation is available. Also check whether WDV is sufficient to calculate dep. bcz assets are 7-8 years older. 

- Income from sale of capital assets will be chargeable as capital gain and not business income. 44AD will not be available for such income.

Thanks

Hi,

-Any deduction allowed under provisions of Section 30 to 38 shall, for the purpose of income computed under the sec 44ad be deemed to have been already given full effect and no further deduction shall be allowed under this section so depreciation is not allowable exp.

-As per the Sec 44AD, even if you are going by presumptive basis calculations deductions allowed under provisions of sec 30 to 38 (i.e including depreciation)  shall be deemed to have been already allowed and  no further deduction under those sections shall be allowed. &  The written down value of any asset  shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.  

So you need to calculate the depreciation on the WDV only and not on the purchase price.

-44AD is not applicable on income derived from sale of capital goods. It will be part of capital gain income.

Sir sale of capital asset is shown under capital gain income as short term capital gain and you need to file ITR 3 for that and not ITR 4.

It wont be shown anywhere in 44AD it is not business income it is income from capital gain.

Thank you

Income from the sale of capital goods would not form part of turnover under Sec. 44AD as the same would be chargeable to tax under the head Capital Gains. Sec. 44AD is part of the head Income from Business/Profession.

Money received from the sale of capital goods would be shown as capital receipt and won't be mentioned anywhere in 44AD. Depending upon whether the asset is depreciable or not, Short Term or Long Term Capital Gain would be chargeable on the sale of the capital asset.

It will be a capital gain and shown under schedule CG. No benefit of 44AD would be available on capital gain income.

The same will be treated as capital gain.

44AD is not applicable on income derived from sale of capital goods.

Hi,

Sale of asset will be chargeable to tax under the head capital gain. Hence, you can't take shelter under presumptive taxation which is provided for business income.

It is expected to have bills of business assets which can give rise to capital gain in future. If you have invoice or know the actual purchase price, you can calculate year on year depreciation on that asset and calculate wdv and capital gain.