Can one person show income from business and profession under presumptive taxation scheme in one return? | 44AD vs 44ADA

Presumptive taxation scheme of government which is covered under a series of sections of 44 i.e. 44AD, 44ADA, 44AE etc.

Most of the people in India who do small business or profession shows their income under this section and using the presumptive taxation scheme wherein they are not required to maintain proper books of accounts.

Out of the two, section 44AD is a very old provision but it was only restricted to businesses and professionals mentioned u/s 44AA were not covered u/s 44AD.

Later, by Finance Act, 2016 44ADA was inserted from 01.04.2017 for professions covered under 44AA wherein such professionals were provided an opportunity to file their return also under presumptive taxation if their receipts are upto Rs. 50 lakh and they show minimum 50% of their receipt as profit.

Now after getting a basic understanding of this let’s understand whether a person who is providing professional service and also doing business can he file Income tax return for both type of receipt under presumptive taxation.

For eg: An architect who also sells furniture, can he show his income from architectural profession u/s 44ADA and his income from furniture u/s 44AD at the same time?

To understand this we need to read the exclusions of section 44AD provided in sub section 6 which is as under:

“The provisions of this section, notwithstanding anything contained in the foregoing provisions, shall not apply to—

 (i)  a person carrying on profession as referred to in sub-section (1) of section 44AA;

(ii)  a person earning income in the nature of commission or brokerage; or

(iii) a person carrying on any agency business.”

The first point/ exclusion of section 44AD says that the provision of this section will not apply to a person who is carrying on a profession referred to in sub-section (1) of section 44AA which are covered u/s 44ADA.

Thus, whether a person uses 44ADA or not if he is carrying on a profession referred to in section 44AA he cannot use provisions of section 44AD.

Now some might complain that these presumptive taxation provisions are business wise and hence a person having two businesses can individually show both under 44AD and 44ADA.

However when we read the exclusion, it first of all starts with a non-obstante clause and secondly it refers to a “person” carrying on a profession covered under 44AA which is a bigger term than business or profession.

Hence, even if a person has separate business and profession but if he is carrying on profession covered under section 44AA he cannot use presumptive taxation for business u/s 44AD.

However practically there are no restrictions placed in ITR where if a person chooses 44AD business in ITR 4 or 3 he cannot fill details for 44ADA. Also it is to clarify that a person cannot fill two ITR for 2 different types of income A person can file only one income tax return. Same was also clarified in our post about Myths about Income tax return.

 

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