Find
You can declare lower income, but then you must keep books and get a tax audit if total income exceeds the basic exemption limit, and file ITR-3. If you had opted for Sec 44AD and then opt out, you cannot return to it for the next five years.
ITR
Declaring less than the presumptive rate
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Provisions
Sec 44AD (now Sec 58); Sec 44AB (now Sec 63); Sec 44AA (now Sec 62)
Analysis
On ₹1,20,00,000 turnover, 6% is ₹7,20,000; showing 3% means ₹3,60,000, saving tax on ₹3,60,000. Against that, you pay for books and audit, and lose the scheme for five years. If the low margin is a one-time event, the saving may not be worth it. Decide with your accountant before the due date.
Close
- Compare tax saved with the cost of books and audit
- Consider the five-year bar on re-entry
- If declaring lower, prepare books and get the audit
- File ITR-3 by the audit due date
The five-year bar in Sec 44AD(4) applies when you opt out after having opted in; check your past years before deciding.
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