Section 44AD says that you can show 8% of your turnover as profits.
Lets say my actual profits are 1Cr and turnover is also 1Cr.
Would I be able to show 8L as profit here?
If no, what is the exact clause and whats the point of presumptive taxation then? (If you have to pay at least as much as actual profits at least)
You are rockstar if you can achieve 1Cr profit on 1Cr turnover 
Jokes apart, Sec 44AD was introduced for small business owners with turnover less than 2 Cr.
For most small business margins are really low and hardly more than low double digits.
However maintaining accurate book of accounts and doing calculations of actual profit is more tedious for them and adds cost.
So to ease compliance burden on them, IT department is like rather than going through all these hoops of calculation, just assume 8% as you net profit margin and pay tax on that.
So point of presumptive taxation is to reduce compliance burden on small business owner and free up time of IT department to focus on bigger fishes
But yes if you can generate 100% profit margin, you are a rockstar. You can show 8L as presumptive profit and just pay tax on that.
Edit Sorry my response was more on traditional business and use of Sec 44 AD on that. Not directly relevant to Stock market trading.
Lets take a real case of a friend. He has turnover of 29.18 lakh and gross profit of 9.6 lakh. Can he apply presumptive taxation?
Thanks
Ratan
Thanks for the reply!
But I can’t help but think about how can this be possible.
Because if a person is trading (intraday) in just one equity, say RELIANCE. And the person has 1Cr year end profit. Using the scrip-wise turnover method, his turnover would be 1Cr only. So this way he just has to pay the tax on 8L. That is quite unbelievable tbh.
Even if you scale number of stocks to say 5-6 (pretty realistic), with profits: 20L, -5L, 50L, 30L, 5L.
The turnover is 1.1Cr with profit 1Cr. Which is not that far off from reality for some expert traders.
Section 44AD was designed mainly from traditional business and mainly to help small business owner save hassle of book keeping and accounting.
If your friend has already calculated his profit as 9.6 lakh, then ideally he should declare that as profit and pay tax on that.
In stock market trading, its kind of difficult to justify that bookkeeping and maintaining accounts is hassle (because all of it is automated). So using Sec 44AD for stock market trading activity is ideally not advisable
My bad. I totally ignored stock market in my previous response. (I assumed traditional businesses … dumb of me)
Yes, for stock market trading taking help of Sec 44AD is generally not advisable, as most book keeping is already done by broker.
Thanks Akash. Will advise him not to go for Sec 44AD. He does option trading.
This topic is already widely discussed in the forum. Have a look. Some people might have a different opinion.
Got my answer. Basically there is no free lunch xD
Conclusion is that opting for 44AD doesn’t make sense for such a trader.
Thanks so much for your help! You don’t know how badly I had been wanting to know the answer to this 
The thing is even if broker maintains everything , he just track your income and profits but business is about income and expenses…If anyone opt for 44AD , he is not suppose to maintain any books of accounts and is not suppose to maintain expenses file…Even if income tax determines actual profit through broker , how they are suppose to actual expenses as assesse is not required to maintain any books and must not had tracked business expense as permitted by law.
@Akash_Shah isnt Balance sheet still required to be maintained by client, even though broker has captured all digital transactions? I am talking about not applying section 44AD for equity traders…
Everyone, I am not a qualified CA, so would not be able comment any more on this. Better get a CA and check with them.
Having said that, it is very easy to comment on such forum that how will IT dept find this and what about that and so on.
But, when actual notice comes from IT department, it is extremely difficult to convince an AO about anything using such whataboutery.
So I personally believe better to be safe than sorry, but every individual can have their own opinion about it.
The problem is even C.A’s has different views on it, i am sure even the quicko guys have replied differently in different places…
The idea would be from the forum to collect knowledge, so as to make knowledgeable discussion with your own C.A’s and not getting caught with cutting corners and later realise it’s implications.
so no harm no foul to anyone who helps and responds here…
As i understand the best way is to get C.A’s skin in the game by going for a full audit yes it will cost you more, but look at that expense as your hedge for any notices from I.T (peace tax) … again just my opinion…