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If a person’s business receipts exceed Rs. 50 lakh – profit of Presumptive tax under section 44ADA cannot be taken. In such a case, the individual would be required to prepare a Profit and Loss Account and Balance Sheet as well as get himself audited by a Chartered Accountant.
Compliance to be made in case business income exceeds Rs. 50 lakhs
If business receipts exceed Rs. 50 lakhs, the following compliances need to be taken care of:-
- Preparation of books of accounts with balance sheet and profit and loss account
If a person’s business receipts exceed Rs. 50 lakh in some financial yearHe needs to prepare proper books of accounts along with Balance Sheet and Profit & Loss A/c and use ITR 3 Form for filing his Income Tax Return.
- Audit u/s 44AB by a Chartered Accountant
Since the annual receipts exceed Rs. 50 lakhs, he will also need to get income tax audit Conducted by a practicing Chartered Accountant. The CA will verify all the facts and check the copy of all the challans and accordingly prepare the audit report which is also required to be submitted along with the Income Tax Return.
- TDS deduction on payment
Since the annual receipts exceed Rs. 50 lakhs, TDS will also need to be deducted on the expenditure. For the purpose of deducting and depositing TDS, the person will also have to Get a TAN Number.
The above are the compliances to be done under the Income Tax Act. In addition to the above compliances, the person would need to be GST compliant as well as receipts that exceed Rs. 20 lakhs per annum
Computation of income and tax leviable thereon
In this case the income will not be computed on presumptive basis but on actual basis i.e.
Income = Receipts – Expenses – Depreciation
To be eligible to claim expense and depreciation, the individual must keep a copy of all expenses.
After computing the income, income tax will be levied on this income as per the income tax slab rates and the highest slab rate of 30% will be applicable.
How to save tax on such income
The individual can also claim the benefit of the following deductions namely:
The complete list of deductions that can be claimed is mentioned here – income tax deduction list
Pro Tip: Even after claiming all expenses as well as deduction benefits, income tax becomes unusually high in most cases. To save tax, smart people have started creating entities in tax havens like Dubai and started paying zero tax on their income. to quote: Tax Benefits of Forming a Entity in Dubai
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