I plan to leave my salaried job and get full time into three services: 1. Coaching for professional exams 2. Corporate trainings 3. Professional consulting/financial modeling to businesses I have seen many comments on the applicability of Sections 44AD or 44ADA. Some people have suggested that the above mentioned services do not fall under Sec 44ADA but instead fall under Sec 44AD. Some people have suggested that the above services are "profession" and not "business" so Sec 44AD is not applicable. A 6% or 8% of Rs.10 or 12 lakh I am expected to make in a year will make my income negligible and I'd pay no taxes, which does not seem too logical. Need some advice on how to treat the income from above services for taxation purposes. Your tax advice will be highly appreciated. Regards, Sachin
Point number 1 would be covered under 44AD i.e. business income and point no. 2 and 3 could be covered under 44ADA under professional service as you are going to give consultation to other people and you must make your invoice accordingly and your TDS would also be deducted accordingly.
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Hi Sachin,
There is a lot of ambiguity with respect to the applicability of section 44ADA and 44AD because of the way section is drafted and the intention of the section.
In my opinion, you can use section 44ADA because section 44AD will result into too less income which cannot be the intention of the law.
Dear Sir,
Hope you are doing well !!
1. Coaching for professional exams- Income from Coaching is not specified as profession under section 44ADA.
Your income shall be classified as business income u/s 44AD.
2 & 3. You income shall be classified as professional income u/s 44ADA.
Hello,
Section 44ADA is available for only eligible professions, and coaching income is not covered in the eligible professional list.
While the other two can be declared under Sec. 44ADA.
I hope that this answer satisfies your requirements.
Regards,
CA Hunny Badlani
Hello Sir,
-44ADA is not applicable to income from coaching. However, you can take the benefit of section 44ad for the same.
-Corporate trainings and professional consultancy are part of eligible professional as specified u/ s 44ADA.
Mr. Sachin,
The services mentioned by you do not fall under the definition of profession as per income tax act. Hence 44AD shall apply in your case.
Kindly note that the profits of 6% 0r 8% are minimum what needs to be disclosed. If your books/estimates suggest that a profit of 50% is made after the end of financial year then you can disclose 50% of profits in your ITR.
We can help in you in filing of your tax returns when they are due!
Feel free to reach out to us.
It all depends your expected earnings further and if you have profits lower than 50% of you income then Section 44ADA will hit and need to be audited otherwise no need.
If profits are above 50% till then no worry you can treat your income normally under "Profits & gains from Business & Profession" and normal tax slab for individual would apply.
