I. Amendments to section 44AD:
The existing provisions contained in the said section (applicable to individual, HUF or partnership firm) provides that notwithstanding anything to the contrary contained in section 28 to 43C, in the case of an assessee engaged in an eligible business having total turnover or gross receipts not exceeding one crore rupees, a sum equal to 8% of the total turnover or gross receipts, or, as the case may be, a sum higher than the aforesaid sum declared by the assessee in his return of income, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profit and gains of business or profession".
Further, under the existing scheme as per proviso to section44AD(2), where the eligible assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) of section 44AD subject to the conditions and limits specified in section 40(b).
Clause 26of the Bill seeks to amend section 44AD of the Income-tax Act relating to special provision for computing profits and gains of business on presumptive basis.
The proposed section 44AD seeks to provide for estimating income of eligible assessee who is engaged in an eligible business, at a sum equal to 8% of the total turnover or gross receipts, or, as the case may be, a sum higher than the aforesaid sum earned by the assessee whose total gross receipts does not exceed two crore rupees.
It is further proposed to omit the proviso to section 44AD(2) and accordingly, in case of eligible assessee being a firm, the salary and interest paid to its partners shall not be allowed to be deducted from the income computed under sub-section (1) of section 44AD.
Further, it is proposed to substitute sub-sections (4) and (5) of the aforesaid section to provide that where an assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous yearnot in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1).
It is further proposed by way of sub-section (5) that, an assessee to whom the provisions of sub-section (4) are applicable and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.
Click here to Know More at http://bit.ly/taxationscheme