Govt to widen ambit of presumptive taxation scheme

The Union Budget today proposed to widen the scope of presumptive taxation scheme to include professionals from certain fields such as legal, medical and engineering, having annual income of up to Rs 50 lakh.
The existing scheme of taxation provides for a simplified presumptive taxation scheme for only certain eligible persons engaged in select businesses only and not for persons earning professional income.
In order to rationalise the presumptive taxation scheme and to reduce the compliance burden of the small tax payers having income from profession and to facilitate the ease of doing business, it is proposed to provide for presumptive taxation regime for professionals, the Finance Bill 2016 said.

"I propose to extend the presumptive taxation scheme to professionals with gross receipts up to Rs 50 lakh with the presumption of profit being 50 per cent of the gross receipts," said Finance Minister Arun Jaitley in his Budget speech in Lok Sabha.
The widening of scope will benefit people in profession such as legal, medical, engineering, architectural, accountancy, technical consultancy or interior decoration.
Government has also proposed to enhance the threshold limit for audit of accounts from Rs 25 lakh to Rs 50 lakh for persons having income from such professions.

Further, Jaitley also proposed to increase the turnover limit under the presumptive taxation scheme under section 44AD of the Income Tax Act to Rs 2 crore "which will bring big relief to a large number of assesses in the MSME category".

Jaitley said it if the taxpayer opts for the presumptive taxation scheme, he has to remain in that scheme for 5 years.
"Further, if he does not offer the income as per the said scheme in any of the five years, he shall not be eligible to claim the benefit under the scheme for next 5 years," he said.
The scheme is currently available for small and medium enterprises (non corporate businesses) with turnover or gross receipts not exceeding Rs 1 crore.
At present about 33 lakh small business people avail of this benefit, which frees them from the burden of maintaining detailed books of account and getting audit done.

These amendments will take effect from April 1, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent years.
A person adopting the presumptive taxation scheme can declare income at a prescribed rate and, in turn, is relieved from tedious job of maintenance of books of account and also from getting the accounts audited.
In case of a person adopting the provisions of section 44AD, income is computed at the rate of 8 per cent of the turnover.