If I opt for presumptive taxation, do I have to continue with presumptive for the next 5 years?

Taxation
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If I opt for presumptive taxation, do I have to continue with presumptive for the next 5 years?

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@Quicko

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Hi @Jack_R

Yes. Once you have opted for the presumptive taxation scheme, you should continue to opt for the same for the next 5 years.
In any case, if you opt for the regular taxation scheme before the end of 5 years, you will not be able to opt for the presumptive scheme for the next 5 years.

Note: 5 years will be counted starting from the year in which you first opted for the regular taxation scheme.

Hope this helps.

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Let me extend this reply. Per section 44AD(5), if you opt OUT of presumptive before the end of 5 years, not only you are barred from opting IN for another 5 years, but for those 5 years, audit shall also become compulsory. This however is subject to condition that your taxable income (from all sources) is more than threshold.

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If turnover alternates between “more than 2 crores” and “less than 2 crores” every other year, is it okay to then keep switching between 44AD and regular taxation since in this case we are not OPTING out of 44AD but forced to switch to regular taxation because the turnover exceeds the eligibility threshold for using presumptive taxation?

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A new proviso has been added to 44AD by Finance Act 2023. Per which, If less than 5% of TO is in cash, 2 crore limit shall get increased to 3 crore. Having said that, if in 1 year TO is more than 44AD threshold (2 cr/3cr) and in next year, you are back to 44AD threshold then you may surely alternate between 44AD and regular taxation.

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Yes, if you opt for presumptive taxation in India, you will have to continue with it for the next 5 years. This is because the government wants to discourage taxpayers from switching between presumptive taxation and normal income tax slabs every financial year.

The presumptive taxation scheme is a simplified tax regime that is available to small businesses and professionals. Under this scheme, taxpayers are taxed on a presumptive basis, which is a fixed percentage of their turnover. This can be a simpler and more affordable option for taxpayers who do not have the time or resources to keep detailed accounting records.

However, there are some disadvantages to the presumptive taxation scheme. One disadvantage is that taxpayers who opt for this scheme are not eligible for certain tax deductions and exemptions. Additionally, taxpayers who opt for the presumptive taxation scheme for a financial year cannot switch to the normal income tax slabs for the same financial year.

If you are considering opting for the presumptive taxation scheme, you should carefully weigh the pros and cons before making a decision. You should also consult with a tax advisor to ensure that you are making the best decision for your individual circumstances.

Here are some of the pros and cons of presumptive taxation in India:

Pros:

  • Simpler and more affordable tax regime
  • No need to keep detailed accounting records
  • Eligible for certain tax deductions and exemptions

Cons:

  • Not eligible for all tax deductions and exemptions
  • Taxpayers cannot switch to the normal income tax slabs for the same financial year
  • Can be more expensive for businesses with high turnover

If you are considering opting for presumptive taxation, you should carefully weigh the pros and cons before making a decision. You should also consult with a tax advisor to ensure that you are making the best decision for your individual circumstances.

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: Itr4 : presumptive : for the business profession of share market nifty options intraday trading .
The taxpayer has to declare the turnover , revenue , expense , profit , transactions etc . in good faith
There is NO need to maintain any books or papers or documents !
What if the taxpayer by mistake or deliberately ; declares false data ?
How will the taxman would come to know ?
Taxman can re-open the files of previous how many years ?
And what is the punishment if caught ?

QUERY 2 : I know if someone opt for the presumptive scheme for current year then he has to follow the scheme for next 5 years . BUT , what will happen if opt out in the 2nd or 3rd year ? Then , for next 5 years he would be barred from opting this scheme ! QUERY QUESTION : BUT , is Audit would be mandatory if opt out on that year or on every year till 5 years ?

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Hey @HSL,

With regards to your query on audit,

If you are opting out of the presumptive taxation scheme before 5 years, you’d be liable to get a tax audit done for the subsequent 5 years.

Moreover, the IT department can re-open cases for up to 3 years in cases of re-assessment. This period can be extended for up to 10 years in the case of serious tax evasion where the income tax authorities have evidence of tax evasion of â‚ą50L or more.

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Audit is allicable to each and all the 5 years individually ?

Can you enlighten this query ?