How you can calculate your tax liability under Section 44AD of the Income Tax Act?
44AD Tax Calculator : Please note that it is always advisable to consult a tax professional or use official tax calculators for accurate and up-to-date calculations.
Here’s a step-by-step guide to manually calculate your tax liability under Section 44AD:
Step 1
Determine Eligibility First, ensure that you meet the eligibility criteria for Section 44AD. As a quick reminder, Section 44AD applies to resident individuals, Hindu Undivided Families (HUFs), or partnership firms (excluding Limited Liability Partnerships) engaged in eligible businesses with a total turnover or gross receipts not exceeding ₹2 crores in a financial year.
Step 2
Determine Presumed Income Under Section 44AD, eligible taxpayers can declare a presumed income based on a percentage of their total turnover or gross receipts. The prescribed percentage varies depending on the nature of the business:
- For businesses engaged in the sale of goods: The presumed income is 8% of the total turnover.
- For businesses engaged in the provision of services: The presumed income is 50% of the total turnover.
Multiply your total turnover or gross receipts by the applicable percentage to calculate your presumed income.
Step 3
Calculate Tax Liability Once you have determined your presumed income, you can calculate your tax liability using the regular income tax slab rates. The presumed income is added to your other income (if any), and the total taxable income is then subject to tax as per the applicable slab rates for the financial year.
Keep in mind that Section 44AD is a presumptive taxation scheme, and the prescribed percentage is considered as the deemed income for tax purposes. However, you still need to consider other provisions of the Income Tax Act, such as deductions and exemptions, to arrive at the final tax liability.
It is important to note that tax laws and rates can change, and there may be specific rules and exceptions that apply to your individual situation. Therefore, it is recommended to consult a tax professional or use official tax calculators provided by the income tax department or authorized sources for accurate calculations based on the current tax laws.
Disclaimer: The information provided above is for general informational purposes only and should not be considered as tax advice. Tax laws are subject to change, and it is always advisable to consult a qualified tax professional for personalized advice based on your specific circumstances.
