PRESUMPTIVE TAXATION SCHEME FOR STARTUPS AND MSMEs.

Compute your total business or professional income at a flat percentage of your total turnover or gross receipts without the burden of maintaining books of accounts.

“MSMEs are the growth engines of our economy,” Sitharaman said.“- The Reason for increasing eligibility limits for FY2023–24 to 3 Crores & Rs. 75 Lacs for Small Businesses & professionals under the Presumptive Taxation scheme is to promote non-cash transactions and ease compliance by reducing high compliance costs for small and micro enterprises.

Are you facing challenges in maintaining books of accounts, preparing financials for the income tax purposes?

Do not worry, opt for presumptive taxation scheme and get rid of the mental stress. With the income tax filing date approaching many of the businesses face this heat and in a hurry to check for the income and expenses in the whole year and are worried about proper assessment of the income received or expenses incurred. Now with this scheme, you directly pay tax flat rate which would be in the following steps:

1. For businesses, 8% of Gross receipts or if receipts are digital, 6% of Gross receipts/ 8% of Gross turnover or if transactions are in digital non cash mode 6% of Gross turnover.

2. For Professionals 8% on 50% of Gross receipts or higher of 50% of Gross receipts.

Eligible persons who can take this scheme are for businesses – 44AD:

1. Resident Individuals.

2. Resident HUF businesses

3. Resident Partnership firms (not LLPs).

Eligible persons who can take this scheme are for professions – 44ADA:

1. Resident Individuals.
   

2. Resident Partnership firms (not LLPs).

Other conditions:

1. If Book income is 95% online mode or non cash transactions or digital transactions, Gross receipts/turnover for business is less than 3 crore and for profession it is less than 75 lakh.

2. If Cash income is more than 5% of total gross receipts/turnover, then Gross receipts for business is less than 2 crore and for profession it is less than 50 Lakh.

3. Once you opt for a presumptive taxation benefit, you have to continue for a continuous period of 5 years else you will lose the benefit for the next 5 years. No switching between regular Books of Accounts and Presumptive Taxation is allowed. Only if you are not eligible or do not qualify for presumptive taxation benefit in any one of the 5 succeeding years, you can opt out and then continue in the subsequent years again.

4. Once you opt out of the Presumptive Taxation scheme within 5 year lock-in period even after being qualifying all the conditions, then you will be subject to a Tax Audit and submit Tax Audit report along with Filing of regular Income Tax returns.

5. Cash Receipts, Bank Cheques, or Bank Drafts are all considered to be Cash Receipts. Only Account Payee crossed cheques, online transfers by electronic mode are considered to be Digital Transactions or Non-Cash Transactions.

Benefits of Presumptive Taxation Scheme

1. No Maintaining Books of Accounts

2. No Tax Audit

3. Single Advance Tax Payment on 15th March

4. Fixed Percentage of Gross Receipts as Deemed Profits. No Income & Expense Statement to be prepared.

5. Low Compliance Costs.

If you are not covered under the presumptive taxation scheme  and your turnover for business for individual and HUF Gross receipts are greater than 25 Lakh or total income is greater than 2,50,000 and if your partnership firm business Gross receipts are greater than 10,00,000 or total income of partner is greater than 1,50,000, or as a professional both individual or partnership firm, your gross receipts exceed 1,50,000, then you need to maintain the following books of accounts mandatorily:

1. Vouchers

2. Journal

3. Ledgers

4. Cash Book, Purchase Book, and Sales Book

5. Prepare complete Final Accounts with a complete breakup of all your Business or Professional Incomes and expenses, to arrive at Profits and Gains from Business or Profession.

MSMEs, Startups, Professionals avail the benefits of Presumptive Taxation scheme. This scheme provides a simplified and convenient approach for all eligible businesses and professionals providing relief from maintaining various books of accounts, thus relieving them from the administrative challenges.