FAQs on Presumptive Taxation & Capital Gains

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  • Last Updated on 7 January, 2021

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Q1. What is the rate of deemed profits in case of presumptive taxation under Section 44AD?

As per the provisions of Section 44AD the rate of deemed profit would be 8% of total turnover or gross receipts during the previous year 2017-18. However, the rate of presumptive income would be 6% in case of digital receipts. 

Q2. What is the rate of presumptive income under Section 44AD on digital receipts?

The rate of presumptive income would be 6% of total turnover or gross receipts in case of digital receipts.

Q3. I have received the sale proceeds of credit sales in the month of July 2018. Whether I can declare presumptive income for credit sales at 6% as such credit sales were made in the previous year 2017-18?  

You can declare presumptive income at 6% for such credit sales while filing your income tax return. The benefit of reduced rate of 6% will be available even if the proceeds of credit sales are received after the previous year but before due date of filing return under Section 139(1).  

Q4. I have made cash sales as well as digital sales for the previous year 2017-18. How can I determine the rate of presumptive profit under Section 44AD?

As per the provisions of Section 44AD the rate of deemed profit would be 8% for cash sales and would be 6% in case of digital receipts.

Q5. Whether a firm can file ITR-4 Sugam for presumptive income? 

Yes, firms can file ITR 4 for presumptive income. 

Q6. I want to opt for presumptive tax scheme under Section 44AD. I have income from more than one house property. Can I file return in ITR-4? 

No, you cannot file ITR-4S. Any person earning income from more than one house property cannot file return in ITR 4. You can report your presumptive income in ITR 3.

Q7. I want to opt for presumptive tax scheme under Section 44AD. I have income from capital gains as well. Can I file return in ITR-4? 

No, you cannot file ITR-4. Any person earning capital gains cannot file return in ITR 4. You can report your presumptive income in ITR 3.

Q8. I have earned profit from sale of listed shares which were kept for more than 12 months. Whether it will be treated as capital gain or business profit?

As per Circular No. 6, dated 29-2-2016 issued by CBDT, if the taxpayer desires to treat profit on sale of listed shares as capital gain then the same cannot be disputed by the AO subject to the condition that same treatment would be given in subsequent years. If taxpayer wishes to treat the profit arising from sale of listed equity shares as capital gain, it shall be exempt from tax under Section 10(38) if all prescribed conditions are satisfied.

Q9. I have earned a profit of Rs. 2 lakhs from sale of long-term listed equity shares in the month of June 2018. Is this gain exempt from tax? Whether I have to report this gain in ITR form?

The Finance Act, 2018 introduces a new Section 112A and withdraws Section 10(38) exemption for the long-term capital gains arising from transfer of listed securities, being equity shares, units of equity oriented funds or units of business trusts.  As per section 112A, long-term capital gains arising from transfer of listed securities, being equity share, units of an equity oriented fund or a units of a business trust shall, be taxed at 10% in excess of Rs. 1 lakh. However, this new Section 112A would be applicable from assessment year 2019-20 i.e., all transactions of sale of listed securities on or after April 1, 2018 shall be reported in the next year ITR form applicable for A.Y. 2019-20. Thus, you are not required to report gains that is taxable under section 112A while filing income-tax return for current Assessment Year 2018-19.

Q10. I have earned a profit of Rs. 2 lakhs from sale of long-term listed equity shares in the month of March 2018. Is this gain taxable under Section 112A? Whether I have to report this gain in ITR form?

The Finance Act, 2018 has introduced a new Section 112A and withdrawn Section 10(38) exemption for the long-term capital gains arising from transfer of listed securities, being equity shares, units of equity oriented funds or units of business trusts.
 
The new Section 112A is applicable from assessment year 2019-20. Thus, long-term capital gains earned in the month of March, 2018 shall be exempt from tax under Section 10(38) provided prescribed conditions are satisfied. Such income shall be reported in ITR 2 or ITR 3, as the case may be.

Q11. I have earned profit from intra-day trading. Is it taxable as business profit or capital gain?

Intra-day trading is considered as speculation business and the income therefrom would either be speculation gain or speculation loss. Income from speculation gains is taxed at the normal rates. However, any losses arising from speculation business are to be set off only against profit of any other speculative business.

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