Section 44AD of the Income Tax Act deals with presumptive taxation scheme available to an individual, Hindu undivided family or a partnership firm, who is a resident, but not a limited liability partnership firm.
Section 44AD deals with people conducting business wherein the person needs to show a minimum of 6% profit of turnover or 8% profit of turnover as applicable. Further there are few exclusion from the section 44AD which is as under:
(ii) a person earning income in the nature of commission or brokerage; or
(iii) a person carrying on any agency business.
Considering the above exclusion we can say that if a person is showing his income and using the purpose code related to business or profession mentioned above, he might receive a notice from Income Tax that he/ she is not eligible to file income tax return using the benefit of provision of section 44AD.
List of codes relating to the above businesses/ profession which are not eligible for 44AD are as under:
| Code | Sub-Sector |
| 9005 | General commission Agent |
| 14001 | Software development |
| 14002 | Other software consultancy |
| 14003 | Data processing |
| 14004 | Database activities and distribution of electronic content |
| 14005 | Other IT enabled services |
| 14006 | BPO services |
| 14008 | Maintenance and repair of office, accounting, and computing machinery |
| 16001 | Legal profession |
| 16002 | Accounting, book-keeping, and auditing profession |
| 16003 | Tax consultancy |
| 16004 | Architectural profession |
| 16005 | Engineering and technical consultancy |
| 16007 | Fashion designing |
| 16008 | Interior decoration |
| 16009 | Photography |
| 16013 | Business and management consultancy activities |
| 16018 | Secretarial activities |
| 16019_1 | Medical Profession |
| 16020 | Film Artist |
| 18001 | General hospitals |
| 18002 | Specialty and super specialty hospitals |
| 18003 | Nursing homes |
| 18004 | Diagnostic centers |
| 18005 | Pathological laboratories |
| 18010 | Medical clinics |
| 18011 | Dental practice |
| 18012 | Ayurveda practice |
| 18013 | Unani practice |
| 18014 | Homeopathy practice |
| 18015 | Nurses, physiotherapists, or other para-medical practitioners |
| 18016 | Veterinary hospitals and practice |
| 18017 | Medical education |
| 18018 | Medical research |
| 18019 | Practice of other alternative medicine |
| 18020 | Other healthcare services |
| 20010 | Individual artists excluding authors |
| 20011 | Literary activities |
| 20012 | Other cultural activities N.E.C. |
It is interesting to note that such exclusion codes have been mentioned in ITR 5 validation rules and not in ITR 3 and 4.
To read more about the validation rules of ITR 5 CLICK HERE: CBDT_e-Filing_ITR 5_Validation Rules.pdf (incometax.gov.in)
To read the full list of business and professional codes CLICK HERE: Business codes and professional codes for Income tax return/ ITR forms for AY 2021-22 – Taxontips (No new business code have been issued for AY 2022-23)
Hence, please remember the above thing while filing your return of income or you might receive a notice from Income Tax Department. If you use the above mentioned codes and file return under 44AD then Income tax department might take your 44AD benefit and process the return accordingly.
Disclaimer: The views presented in the above article are personal views of our team and has no legal binding. For any legal opinion consult a tax professional.
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