In Budget 2025, the Hon’ble Union Finance Minister Smt. Nirmala Sitharaman has presented new income tax proposal for increase of tax exemption limit in the Income Tax Act.
The tax exemption limit through rebate has been increased to Rs 12 lakh for non-salaried taxpayers and to Rs 12.75 lakh for salaried taxpayers (due to standard deduction of Rs 75,000).
Section 44AD and 44ADA of Income Tax Act provides presumptive taxation for businesses and certain professionals.
Section 44AD of Income Tax Act-:
It provides presumptive taxation scheme that allows businessmen to pay tax on presumptive income without maintaining and auditing the books of accounts subject to annual turnover is less than Rs. 2 crores (Rs. 3 crores if 95% of receipts are through banking mode). Taxable income under Section 44AD shall be calculated at the rate of 8% of total gross turnover or 6% of total gross turnover if transactions through digital mode. Section 44AD is applicable in case of individuals or HUF or partnership firms (excluding LLP).
Let’s understand through practical example -:
Mr. A having Annual Gross Turnover of Rs. 2 crores from its business and all transactions carried through banking mode.
Taxable income for Mr. A under Section 44AD – Rs. 2 crores*6% = Rs. 12,00,000
As per Budget 2025, taxable income of Mr. A is Rs. 12,00,000 hence he not liable to pay any tax on the same. It means indirectly if businessmen having turnover up to Rs. 2 crores and filing income tax return under Section 44AD, not liable to pay any tax on the same.
Section 44ADA of Income Tax Act -:
It provides presumptive taxation scheme that allows certain professionals to pay tax on presumptive income without maintaining and auditing the books of accounts subject to annual professional fees is less than Rs. 50 Lakhs (Rs. 75 Lakhs if 95% of receipts are through banking mode). Taxable income under Section 44ADA shall be 50% of the total professional earnings. Section 44ADA is applicable in case of individuals or partnership firms (excluding LLP).
Let’s understand through practical example -:
Mr. A in receipt of annual gross professional fees amounting to Rs. 24 Lakhs from its profession and all transactions carried through banking mode.
Taxable income for Mr. A under Section 44ADA – Rs. 24 Lakhs*50% = Rs. 12,00,000.
As per Budget 2025, taxable income of Mr. A is Rs. 12,00,000 hence he not liable to pay any tax on the same. It means indirectly if certain specified professionals in receipt of gross professional fees up to Rs. 24 Lakhs and filing income tax return under Section 44ADA, not liable to pay any tax on the same.
As explained above as per Budget 2025, NIL tax till turnover of Rs. 2 crores for small businesses and Rs. 24 Lakhs professional income for professionals filing income tax return under Section 44AD and Section 44ADA Income Tax Act respectively.
Disclaimer: The above article is meant for informational and educational purposes only, and should not be considered as any investment and financial advice. Articles oasis suggests its readers/audience to consult their financial advisors before making any money related decisions.