Understanding Section 44AD: Simplified Income Tax for Small Businesses in India
Discover how Section 44AD simplifies income tax for small businesses in India with a presumptive taxation scheme.
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Section 44AD of the Income Tax Act in India offers a simplified tax regime for small businesses. Businesses with turnovers up to ₹2 crore can opt for this presumptive taxation scheme and declare profits at 8% of turnover (6% for digital transactions). This eliminates the need for maintaining detailed books of accounts and conducting audits, thereby reducing compliance burdens significantly.
FAQs & Answers
- What is Section 44AD of the Income Tax Act? Section 44AD provides a presumptive taxation scheme for small businesses in India, allowing them to declare profits at a rate of 8% on turnover up to ₹2 crore.
- Who is eligible for the 44AD scheme? Businesses with a turnover of up to ₹2 crore that are not claiming any deductions under sections 30 to 38 of the Income Tax Act are eligible for the 44AD scheme.
- What are the benefits of opting for 44AD? The benefits include simplified tax compliance, as it eliminates the requirement to maintain detailed accounting records and undergo audits.
- How does the 44AD scheme affect digital transactions? For businesses accepting digital payments, the presumptive profit rate is lowered to 6%, providing an additional incentive for adopting cashless transactions.