Hi. I am a freelance web designer and cater exclusively to overseas clients and receive weekly payments in my bank account through an online portal, Upwork. I have submitted my tax return under section 44ada for professionals. 1. Does my income qualify for section 44ad as sole proprietor? 2. Will I need to register the company in any form to file under 44ad as sole proprietor? 3. Will I have to modify my previous tax return? Any advice would be much appreciated. Thanks!
44ADA is only for professional who are covered in definition of professional u/s 44AA,
Professional as per above section , a person carrying on any of the following
Legal
Medical
Engineering
Architectural
Accountancy
Technical Consultancy
Interior Decoration
Any other profession that may be notified by CBDT in future
Hi,
1. If you are a professional, your income does not qualify for 44AD. It may qualify for section 44ADA depending upon your nature of profession.
2. No
3. It depends upon the nature if your profession.
Please feel free to call/ revert in case you need more clarity.
Thank you for your response, Abhishek. I would like a little more clarification on that. I am a freelancer who works with clients to design and develop websites and web applications. All my clients are overseas and I work remotely from my home in Delhi. Would this be treated as a profession under 'Technical Consultancy' mentioned in section 44ADA or can it be treated as a sole proprietor business wherein I can use section 44AD?
You can take benefit of 44ADA, NOT 44AD. Your 50% of income will be considred as taxable income.
You can opt for presumptive taxation under 44ADA.
44AD is for businesses and not for professionals.
If, in the future, I open an office and hire employees to cater to these very same clients, would it then fall under 44AD or would I then not be able to avail presumptive taxation at all?
Not an issue till your gross receipts crosses 2 crores
In such case also, you can avail benefit of presumptive taxation scheme under section 44ADA.
Hello,
You will still be able to file your IT returns under 44ADA even if you open an office and hire employees and continue with the same work.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP
Sorry but you can't claim 44AD. You may get benefit of presumptive taxation under section 44ADA.
Please feel free to call/ revert in case you need more clarity.
Hi,
Technical consultancy is a wide term and you can call your design and development of websites as technical services and claim the benefit of section 44ADA. As per Income-tax Act, 1961 there is no need for you to register your sole proprietorship.
Even if you do operate out of an office and employ personnel, you can continue to claim the presumptive taxation under section 44ADA.
Trust this clarifies.
Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
