Selling of medicines transaction professional service purpose show in itr allowed

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Kollipara sundaraiah asked 1 month ago

A Doctor running a own clinic and sales of medicines transactions sec 44ad opt presumptive scheme itr returns filed every year sales of medicines turnover rs:50 lacs.but selling of medicines transaction conversion to professional service purpose used transaction professional expenses claim show in itr returns in sec 44ada provision allowed or not.

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Sunil answered 1 month ago

Under Section 44AD, presumptive taxation is applicable for businesses with a turnover up to Rs. 2 crores, including medicine sales. Section 44ADA, on the other hand, applies to professionals (like doctors, lawyers, etc.) with a gross receipt up to Rs. 50 lakhs.
If the doctor wants to shift the medicine sales to be considered under professional services (and therefore under Section 44ADA), it may not be appropriate since the sale of medicines is considered a business activity and not part of professional receipts.
Section 44ADA is applicable only for professional income, not for business income like the sale of goods. Therefore, it wouldn’t be appropriate to claim those expenses under Section 44ADA unless the sales clearly qualify as part of professional services rather than business activities.

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Sunil answered 1 month ago

Section 44AD – Presumptive Taxation for Businesses
Applicability:

Eligible taxpayers:
- Individuals, Hindu Undivided Families (HUFs), and Partnership firms (excluding LLPs) engaged in eligible businesses.
- Primarily for small businesses such as retail traders, manufacturers, or anyone conducting any business other than those mentioned under Section 44AE (for transporters).
Ineligible for 44AD:
- Professionals specified under Section 44AA(1) (e.g., doctors, lawyers, engineers, etc.).
- Businesses involved in commission or brokerage.
- Businesses related to agency.

Turnover Limit:

The gross turnover or gross receipts should not exceed ₹2 crore in the financial year.

Presumptive Income Calculation:

The income is presumed to be 8% of the total turnover or gross receipts for businesses that receive payments in cash.
If all or part of the turnover is received through digital payments or bank account transfers (non-cash transactions), the presumed income is 6% of such receipts.

Conditions:

The taxpayer cannot claim any further business-related expenses such as depreciation, salaries to staff, etc., as deductions.
If the taxpayer opts for this scheme, they are not required to maintain regular books of accounts.
Taxpayers opting for Section 44AD are exempt from audit unless they declare income lower than the presumptive rate, in which case a tax audit becomes mandatory if their total income exceeds the basic exemption limit.

Other Conditions:

If a taxpayer opts out of this scheme, they are required to maintain regular books of accounts and cannot opt back into the scheme for the next 5 financial years.
Opting Out of Section 44AD Before the 5-Year Period:
- If a taxpayer opts out of the Section 44AD presumptive taxation scheme after availing it in any year, they will not be allowed to re-enter the scheme for the next 5 financial years.
- Once opted out, they must maintain regular books of accounts and get them audited if their total income exceeds the basic exemption limit.

Section 44ADA – Presumptive Taxation for Professionals
Applicability:

Eligible taxpayers:
- Individuals, Hindu Undivided Families (HUFs), and partnership firms (excluding LLPs) engaged in specified professions as defined under Section 44AA(1), such as:
  - Legal professionals
  - Doctors
  - Engineers
  - Accountants
  - Architects
  - Technical consultants, and other similar professions.

Gross Receipts Limit:

The gross receipts from the profession should not exceed ₹50 lakhs in the financial year.

Presumptive Income Calculation:

The income is presumed to be 50% of the total gross receipts or turnover from the profession.

Conditions:

The professional cannot claim further expenses (like rent, depreciation, or salaries) as deductions once they opt for the presumptive taxation scheme under Section 44ADA.
No need to maintain detailed books of accounts if opting for presumptive taxation under Section 44ADA.
A tax audit is not required unless the taxpayer declares income below 50% and the total income exceeds the basic exemption limit.

Other Conditions:

Just like Section 44AD, once a professional opts out of Section 44ADA, they cannot opt back into the presumptive scheme for the next 5 financial years.

Key Differences Between Section 44AD and Section 44ADA:

Feature
Section 44AD
Section 44ADA

Applicability
Businesses other than those in the profession.
Specified professionals like doctors, lawyers, etc.

Turnover/Gross Receipts Limit
Up to ₹2 crores.
Up to ₹50 lakhs.

Presumed Income Rate
6% for digital transactions, 8% for cash transactions.
50% of gross receipts.

Expenses Allowed as Deductions
No further deductions for expenses.
No further deductions for expenses.

Books of Accounts
Not required.
Not required.

Tax Audit Requirement
Required if income is lower than presumed rate and total income exceeds exemption limit.
Required if income is lower than presumed rate and total income exceeds exemption limit.