Section 44ADA - Computing profit & gains of Profession on presumptive basis

Sec. 44ADA- A new section inserted  by finance act,2016. In this Sec. -

       -   An assessee being a resident in India,
       -   engaged in a Profession referred to in Sec. 44AA(1),
       -   whose total gross receipt do not exceeds fifty lakh rupees,
       -   the rate of computation of income is 50% of the total gross receipts,
       -   or the rate higher than the aforesaid (50%) rate
       -   shall be deemed to be the profit and gain of such profession to tax under the head PGBP.

Important Point : -

• No deduction allowed Under section 30 to 38.
• No required to maintain books of accounts U/s 44AA.
• No required to get tax audit U/s 44AB.
• Not required to deposit advance tax in installment, Whole amount pay on or before 15th March

Profession referred to in Sec. 44AA(1):- A person resident in India engaged in following profession can take advantage of presumptive taxation scheme:-

• Legal
• Medical
• Engineering and architectural
• Accountancy 
• Technical consultancy
• Interior decoration
• Any other profession as notified by CBDT

Section 44AD - Computing Profit & gains of Business on presumptive basis

First we read two important explanation :-

      1.  "Eligible assessee" means -

• an individual, HUF or a Partnership firm, who is a resident, but does not include a LLP firm and;
• Who has not claim deduction under any of section 10AA or deduction U/s 80IA-80RRB.

      2. "Eligible Business" means -

• Any business except the business of plying, hiring or leasing goods carriages referred to Sec. 44AE  and;
• Whose total turnover or gross receipt does not exceed two Crore rupees.

Sec. 44AD(1) :- 

• If an eligible assessee carried on eligible business willing to opt presumptive basis scheme, the rate of computation of income is 8% of total turnover or gross receipts of such business;
• or a rate higher then the aforesaid rate (i.e 8%) claimed to have been earned by the eligible assessee;
• shall be deemed to be the income under the head "Profit and gain of business".

Important Points-

        1. This provision shall not apply to- 

• A person carrying on profession as referred in Sec. 44AA;
• A person earning income in the nature of commission or brokerage; or
• A person carrying on any agency business.

      2. If an assessee declares income as per Sec. 44AD(1)-

• Deduction U/s 30 to 38 are not allowed;
• Not required to maintain books of account as per Sec. 44AA;
• Not required to get tax audit U/s 44AB.
• Assessee don't have to pay advance tax in installment, but assessee have to pay 100% advance tax on 15th March of that particular F.Y.

     3. An additional condition has been added, If assessee opting for the presumptive scheme-

• File presumptive scheme for at least 5 years in continuation
• If assessee decide to show and file profits as regular business before the end of these 5 years, you will lose presumptive taxation for the subsequent 5 years.  

       

Sec. 80D: Deduction in respect of Medical Insurance Premium

Eligibility of Tax benefit of Sec. 80D: -
You can avail the deduction, if you have paid any premium on medical policy U/s 80D taken for-

• Self,
• Spouse,
• Dependent Children,
• Parents.

Amount of Deduction:

In case of an individual, amount paid in respect of Medical insurance, Preventive health checkup and Central Govt. Health Scheme for person described below, shall avail deduction, Subject to Limit given below: -

• For Self, spouse and dependent children: Rs. 25000/- ( Rs.30000/-* if person is a senior citizen** for A.Y. 2018-2019..).
• For parents of the assessee: (Additional) of Rs. 25000/- (Rs.30000/-* if person is a senior citizen** for A.Y. 2018-2019).

In case of HUF, amount paid in respect of Medical Insurance, Preventive health checkup and CGHS for any member of family, shall avail deduction, subject to limit:-

• Premium up to Rs. 25000/- (Rs. 30000/-* if any member insured is a senior citizen for A.Y. 2018-2019)

Deduction in respect of Medical Expenditure: -

For A.Y. 2018-2019, If the taxpayer or any of his family member is of 80 years or more and health insurance premium is not paid, a deduction of medical expenses up to Rs.30,000/- can be claimed. From A.Y. 2019-20 this deduction has been increased to Rs.50,000/- and is also available to a person of 60 years or more

Mode of Payments:

Payment should be made by any mode other then cash (however, payment for preventive health checkup can be made in cash.)

NOTE: 

* Rs. 30000/- increased to Rs. 50000/- for A.Y. 2019-2020

** Senior Citizen: Any resident individual of the aged 60 yrs. or above.

*** Deduction for Preventive health checkup shall not exceeds in aggregate of Rs. 5000/-

Standard Deduction for Salaried Individual under Section-16(ia) from A.Y. 2019-2020

From Budget 2018, introduced a Standard deduction of Rs. 40000/- for salaried employee from A.Y. 2019-2020
This will be in lieu of existing transport allowances and Medical expenses reimbursement.

Let us understand this with a small example:

Particulars	Until AY 2018-19	From AY 2019-20
Gross Salary (in Rs.)	5,00, 000	5,00,000
(-) Transport Allowance	19,200	Not Applicable
(-) Medical Allowance	15,000	Not Applicable
(-) Standard Deduction	Not Applicable	40,000
Net Salary	4,65,800	4,60,000

For Taxpayers Receiving Pension:

In a recent clarification issued by the income tax department, if a taxpayer has received pension from the former employer, it is taxable under the head ‘Salaries’. Therefore, the taxpayer shall be entitled to claim a standard deduction of Rs. 40,000 or the amount of pension whichever is less.

NPS Tax Benefit- Sec. 80CCD(1), 80CCD(1B) and 80CCD(2)

In this section, where an assessee investment or deposited in National Pension Scheme (NPS), he shall be allowed deduction, subject to this provision as be described below-

NPS tax benefit under Sec. 80CCD(1)-

1. An individual contribution to NPS, 1. for self Employed 20% of Gross total Income, 2. For employees 10% of Salary. 
2. Maximum deduction is Rs. 1,50,000/- according to Sec.80CCE- the aggregate deduction of Sec. 80C+80CCC+80CCD(1) does not exceed Rs. 150000/-
3.  Salary Means Basic Salary + DA. (Not include any other allowance and perquisite)
4. Here Employee contribution in NPS is like to be Employee contribution in PF.

NPS tax benefit under Sec. 80CCD(1B)-

1. Additional deduction of Rs.50000/- allowed to an individual assessee, for self deposited in NPS
2. Both self employed and employees avail this deduction.

NPS tax benefit under Sec. 80CCD(2)-

1. The contribution made by employer is treated as salary of the employee. Employee shall get deduction for this amount U/s 80CCD to the extent of 10% of the salary.  
2. Limit of deduction for Employer contribution is- 1. Amount contributed by employer or 2.  10% of  of Salary. Whichever is lower.
3. This is additional deduction which will not form the part of Sec.80C limit.

Deduction on interest for Senior citizens U/s - 80TTB from A.Y. 2019-2020

Sec. 80TTB newly inserted vide Budget 2018 wherein, provide deduction of Rs. 50000/-on interest income. This deduction is available to senior citizens from A.Y. 2019-2020.

This deduction is allowed on interest earned by a senior citizen includes any interest income on deposit with banking company or banking institution to which Banking regulation Act,1949 applies -

• From saving account with a bank, co-operative bank and post office
• From Fixed deposit ,Recurring deposit(RD) and time deposit.

How to avail deduction :- 

1. Maximum deduction of Rs. 50000/- or,
2. Interest earned during the year from specified avobe.

                              Whichever is Lower

Note:- 

1.  Here deduction u/s 80 TTA is not allowed, when assessee get deduction U/s 80TTB.
2.  No deduction shall be allowed under this section, where interest earned by any deposit with firm,body of individual, association of person. Eg. Interest earned from Partner capital.

Deduction on Interest U/s- 80TTA

Sec. 80 TTA provide a deduction of Rs. 10000/-on interest income. This deduction is available to an individual and HUF for A.Y. 2018-19 and onward

This deduction is allowed on interest earned-

• From a saving account with a bank.
• From a saving account with a post office
• From a saving account with a co-operative Bank.

Note:- This deduction is NOT allowed on interest earned on Fixed deposit, recurring deposit(RD) and any other time deposit.

How to avail deduction: - 

1. Maximum deduction of Rs. 10000/- or,
2. Interest earned during the year as specified above.

                     Whichever is lower