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Nov 12, 2020
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Income Tax: Deduction of expenses deemed to be claimed under presumptive tax scheme
I have pension and interest income. Last year I joined a bank on a contract basis and it paid remuneration under Section 194 C. This income is less than Rs 50 lakh. Can I claim expenses under Section 44ADA for this income?
—YK Chugh
We are assuming that you are engaged in a profession eligible for computation of profits on a presumptive basis. If gross receipts from such profess-ion do not exceed Rs 50 lakh, you may declare income on presumptive basis under Section 44 ADA. A sum equal to 50% of the total gross receipts shall be deemed as ‘profits and gains from business or profession’. However, all expenses shall be deemed to have been allowed and no further deduction of any expense shall be permissible. Therefore, you shall not be entitled to claim deduction.
Section 194C governs deduction of TDS on payment to contractors and not professionals. If your income does not qualify as ‘professional’ income, you may declare income on presumptive basis under Section 44AD, wherein 8% of total turnover or gross receipts shall be deemed as profits and gains from business (6% if turnover or gross receipts are received by way of account payee cheque or account payee bank draft or use of electronic clearing system through a bank account). In this case too, you shall not be entitled to claim deduction of expenses.
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