How to File a Non Taxable Return
How to File a Non Taxable Return Filing income tax returns can be a complicated task, especially when your business turnover is in crores but your actual income is lower. This is where the presumptive taxation scheme under Section 44AD of the Income Tax Act comes to your rescue. If your turnover is up to ₹2 crore, Section 44AD allows you to declare income at a prescribed rate instead of maintaining detailed accounting records. How to File a Non Taxable Return But what happens if your turnover is ₹1.2 crore and your actual profit is lower than the presumed 8% or 6% under Section 44AD? How do you file a non-taxable return in such cases?
In this blog, we’ll explain everything you need to know about filing a non-taxable return with a ₹1.2 crore turnover under Section 44AD. How to File a Non Taxable Return This guide is especially helpful for small business owners, freelancers, and entrepreneurs opting for the presumptive taxation scheme but whose actual income is below the tax threshold.
What is Section 44AD?
Section 44AD of the Income Tax Act is designed to make tax compliance easier for small businesses and professionals. How to File a Non Taxable Return It offers a presumptive taxation scheme where businesses with a turnover of up to ₹2 crore can declare a minimum profit of 8% (for cash receipts) or 6% (for digital receipts) of their gross receipts or turnover. This profit is presumed and is considered as the taxable income of the business, thereby simplifying the process of tax filing.
Eligibility for Section 44AD:
– Applicable to individuals, Hindu Undivided Families (HUFs), and partnerships (other than LLPs).
– Only for businesses (trading, manufacturing, and other business activities); not applicable to professionals, commission agents, or brokers.
– Total turnover or gross receipts should not exceed ₹2 crore.
Why File a Non-Taxable Return?
How to File a Non Taxable Return Despite the presumptive tax benefit, there are situations where your actual income may be lower than the presumed profit, especially in the case of high turnover and low profit margins. For instance, if your turnover is ₹1.2 crore but your actual profit is below the taxable limit (₹2.5 lakh for individuals), you might want to file a non-taxable return.
Filing a return declaring profits lower than 8% (or 6%) requires auditing your accounts by a chartered accountant, as per Section 44AB, but if your income is genuinely non-taxable, it’s essential to file the return correctly to avoid unnecessary scrutiny.
Step-by-Step Guide to Filing a Non-Taxable Return with ₹1.2 Crore Turnover
Here’s a detailed breakdown of how to file a non-taxable return when your turnover is ₹1.2 crore but your profits are below the tax limit.
Step 1: Determine if You’re Eligible for Presumptive Taxation
First, ensure your business qualifies for the presumptive taxation scheme under Section 44AD. Your total turnover must be less than ₹2 crore, and you should not be involved in professions like legal, medical, engineering, or consultancy services, as they fall under a separate presumptive taxation scheme (Section 44ADA).
Step 2: Calculate Your Presumed Profit
How to File a Non Taxable Return If you’re using the presumptive taxation scheme, you would typically declare 8% (for cash transactions) or 6% (for digital transactions) of your turnover as your profit. For a ₹1.2 crore turnover:
– For cash receipts, the presumed income would be ₹9.6 lakh (₹1.2 crore x 8%).
– For digital receipts, it would be ₹7.2 lakh (₹1.2 crore x 6%).
However, if your actual profit is lower than this, you’ll need to declare a lower income.
Step 3: Declare Lower Profit and Get a Tax Audit
To declare a profit below the presumed rate, you must get your accounts audited by a chartered accountant. This is mandatory under Section 44AB when declaring income lower than the prescribed limit under Section 44AD. The audit will verify your business’s actual profit or loss and ensure compliance with the tax laws.
Step 4: File ITR-3 with Complete Details
When declaring profits below the presumed rate, you must file **ITR-3** instead of **ITR-4** (which is typically used for presumptive income declarations). How to File a Non Taxable Return Here’s what you need to include:
– Turnover details (₹1.2 crore in this case).
– Actual profit figures.
– Audited financial statements prepared by a chartered accountant.
– All other relevant details like depreciation, loans, advances, and capital account statements.
Step 5: Pay Advance Tax (if applicable)
Even though you’re declaring lower profits, you should ensure that you have paid any advance tax due during the financial year. If you failed to pay advance tax, you might be liable for interest under Sections 234B and 234C.
Step 6: Submit Tax Audit Report
After filing your ITR-3, the **tax audit report** (Form 3CA/3CB and Form 3CD) must be submitted online. This report must be verified and signed by a chartered accountant and uploaded within the due date for filing audited returns (usually by September 30 for the assessment year).
Important Points to Remember
– Turnover Limit: Ensure your turnover does not exceed ₹2 crore to remain eligible under Section 44AD.
– Audit Requirement: Declaring income below the prescribed 8% or 6% will necessitate a tax audit under Section 44AB.
– Use ITR-3: When declaring lower-than-presumed income, file ITR-3 instead of ITR-4.
– Maintain Proper Records: Though Section 44AD allows for simplified compliance, if you declare lower profits, maintaining proper financial records becomes critical.
– Advance Tax: Even under the presumptive taxation scheme, advance tax must be paid if your tax liability exceeds ₹10,000 in a financial year.
Benefits of Filing a Non-Taxable Return
Filing a non-taxable return is essential if your actual income is below the tax threshold, despite a high turnover. Some key benefits include:
– Compliance with tax laws: Filing an accurate return helps avoid penalties and scrutiny from the tax department.
– Transparency: A non-taxable return with accurate details ensures that your business remains compliant and transparent.
– Avoid unnecessary tax payments: By filing a non-taxable return, you can ensure that you’re not paying tax on presumed profits when your actual income is lower.
Conclusion
Filing a non-taxable return under Section 44AD with a turnover of ₹1.2 crore requires careful planning, especially if your actual income is below the presumed profit margin. By following the steps outlined above and ensuring that your accounts are properly audited, you can file your tax return accurately and avoid any complications.
If you have any doubts or require professional assistance in filing your tax return under Section 44AD, feel free to consult with a chartered accountant. How to File a Non Taxable Return Compliance is the key to smooth business operations and hassle-free tax filing!
Need Help with Tax Filing?
Subscribe to our YouTube channel Taxgyany for more practical guides on tax filing, compliance, and business management tips. Stay informed with the latest updates in taxation and business laws to ensure you never miss a deadline!
FAQs
Q: Can I opt for Section 44AD if my turnover exceeds ₹2 crore?
A: No, Section 44AD is applicable only if your turnover is up to ₹2 crore.
Q: Do I need to maintain detailed books of accounts under Section 44AD?
A: No, under Section 44AD, you’re not required to maintain detailed books of accounts unless you declare income lower than the prescribed rate (8% or 6%).
Q: Is a tax audit mandatory if I declare lower profits under Section 44AD?
A: Yes, if you declare income lower than the prescribed limit, a tax audit is mandatory under Section 44AB.
Disclaimer:
The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.
For More Information :https://taxgyany.com/
Fantastic site A lot of helpful info here Im sending it to some buddies ans additionally sharing in delicious And naturally thanks on your sweat