Filing the Companies Income Tax Return under Section 44AD is a streamlined process designed to simplify tax compliance for small businesses. Section 44AD, under the Income Tax Act, provides a presumptive taxation scheme that allows eligible businesses to declare their income at a prescribed rate, reducing the burden of maintaining detailed accounts and undergoing audits. This guide outlines the eligibility criteria, income computation, and step-by-step procedure to file the return using Form ITR-4, ensuring compliance with the tax regulations while leveraging the benefits of this simplified scheme.

To file the Companies Income Tax Return under Section 44AD, follow these detailed steps.

Eligibility Verification

Ensure the company’s eligibility to file under Section 44AD. This section generally applies to individuals, Hindu Undivided Families (HUFs), and partnership firms (excluding LLPs) engaged in any business except.

a. Businesses involved in plying, hiring, or leasing goods carriages as referred to in Section 44AE.
b. Agency businesses.
c. Businesses earning income in the nature of commission or brokerage.
d. Businesses with total turnover or gross receipts exceeding ₹2 crores in a financial year.

Income Computation

Under Section 44AD, the presumptive income is calculated as 8% of the total turnover or gross receipts of the business for the financial year. If the turnover or gross receipts are received through digital transactions, the presumptive income can be declared at 6%.

Filing Form ITR-4

Use Form ITR-4 (Sugam) for filing the income tax return. This form is designed for individuals, HUFs, and firms opting for the presumptive taxation scheme under Sections 44AD, 44ADA, and 44AE.

Required Details in ITR-4

a. General Information: Include basic details such as name, PAN, address, and contact information.
b. Gross Turnover or Receipts: Declare the total turnover or gross receipts from the business.
c. Presumptive Income: Compute the income based on the prescribed rate (8% or 6%).
d. Bank Details: Provide details of all bank accounts held during the financial year.
e. Verification: Ensure the return is verified by the authorized person.

Books of Accounts and Audit

There is no requirement to maintain detailed books of accounts under Section 44AD if income is declared at the presumptive rate. Additionally, no audit is required under Section 44AB if income is declared under Section 44AD.

Advance Tax Payment

For those opting for the presumptive taxation scheme under Section 44AD, the entire amount of advance tax must be paid by 15th March of the financial year. Failure to pay advance tax by this date will attract interest under Section 234C.

Filing the Return

a. Visit the Income Tax e-Filing website.
b. Log in using your PAN and password.
c. Select “File Income Tax Return” and choose the relevant assessment year.
d. Select the applicable ITR form (ITR-4) and complete the required details.
e. Submit the form and e-verify the return using methods such as Aadhaar OTP, net banking, or EVC (Electronic Verification Code).

Document and Record Maintenance

While maintaining detailed books of accounts is not mandatory, it is advisable to keep records of the turnover, receipts, bank statements, and payment receipts for verification purposes.

The Goods and Services Tax (GST) Council in India continues to evolve its framework to better meet the needs of taxpayers and streamline tax processes. The latest updates from the 53rd GST Council Meeting, held on June 22, 2024, introduce significant changes and clarifications across various sectors. Here’s a detailed breakdown of the key amendments, rate changes, and compliance updates you need to know.

Key Amendments and Clarifications

1. Corporate Guarantee Valuations: The Council has clarified the valuation rules for corporate guarantees between related parties, specifically excluding exports and cases with full Input Tax Credit (ITC). This ensures a standardized approach to valuations, reducing disputes and ensuring fair tax practices.
2. IGST Refund Mechanism: A new mechanism has been established for refunding additional Integrated Goods and Services Tax (IGST) paid due to post-export price increases. This change aids taxpayers in reclaiming excess IGST, providing much-needed relief for exporters.
3. Appeal Filing Thresholds: To reduce litigation and streamline the appeals process, the department will not file appeals if the demand is:
   • Up to ₹20 lakhs in the GST Appellate Tribunal (GSTAT),
   • Up to ₹1 crore in High Courts,
   • Up to ₹2 crores in the Supreme Court.
4. Biometric Authentication: Biometric-based Aadhaar authentication has been introduced for GST registration applicants across India. This measure aims to combat fraudulent ITC claims and ensure the authenticity of registrations.
5. Exemptions for Small Businesses: Taxpayers with an annual turnover of up to ₹2 crores are exempt from filing FORM GSTR-9/9A for FY 2023-24. This exemption significantly reduces the compliance burden for small businesses.

GST Rate Changes and Exemptions

Goods:

1. Milk Cans: All milk cans, whether made of steel, iron, or aluminum, will now attract a 12% GST rate. This uniform rate simplifies the tax structure for dairy product packaging.
2. Cartons and Boxes: The GST rate on cartons, boxes, and cases made of both corrugated and non-corrugated paper or paperboard has been reduced from 18% to 12%. This reduction is aimed at lowering packaging costs in various industries.
3. Solar Cookers: All types of solar cookers, regardless of being single or dual energy source, will now attract a 12% GST rate. This change promotes the use of renewable energy sources.

Services:

1. Indian Railways: GST is now exempt on services provided by Indian Railways to the public and on intra-railway transactions. This exemption, regularized from October 20, 2023, aims to reduce transportation costs and promote rail travel.
2. Accommodation Services: A new GST exemption has been introduced for accommodation services costing up to ₹20,000 per month per person, provided the stay is for at least 90 days. This exemption covers both current and past cases.
3. Insurance Sector: Transactions of ceding/re-insurance commissions between insurers and re-insurers are declared as no supply under Schedule III of the CGST Act, 2017. This clarification helps streamline tax compliance in the insurance sector.

Compliance and Procedural Changes

1. Introduction of FORM GSTR-1A: FORM GSTR-1A has been introduced, allowing taxpayers to amend or add details in FORM GSTR-1 before filing FORM GSTR-3B for the same period. This addition helps ensure accuracy in tax filings.
2. Section 122A – Penalties and Registration Procedures: A new section, 122A, has been added to address penalties for failing to register specific machinery used in manufacturing under special procedures notified under Section 148 of the CGST Act of 2017. Non-compliance can lead to seizure and confiscation of machinery, although provisions exist to avoid confiscation if penalties are paid promptly.
3. Telecom Sector: The Council has provided detailed clarifications on the time of supply for spectrum allotment with installment payments, helping telecom companies better manage their tax liabilities.
4. Motor Insurance: Clarifications on the taxability of wreck and salvage values in motor insurance claims and the availability of ITC on repair expenses reimbursed by insurance companies have been provided, ensuring smoother operations in the insurance industry.

These updates reflect the GST Council’s ongoing efforts to refine the tax system, making it more efficient and taxpayer-friendly. By addressing sector-specific issues and simplifying compliance requirements, these changes aim to enhance the overall GST framework in India.

Thanks,