Changes in taxation of presumptive income

In a relief to small business owners, Finance Minister Arun Jaitley in his Budget speech has proposed changes to presumptive income taxes.

As per the new proposal, the limit of turnover has been revised from Rs 1 crore to Rs 2 crore for medium or small enterprises. Now, businesses with an annual turnover of less than, or equal to Rs 2 crore will be able to file ITR 4S instead of the lengthier ITR 4. Also, professionals have been brought under Section 44AD. For turnover of up to Rs 50 lakh, professionals can now show income of 50% of gross receipts and pay tax on that.

 “This is a welcome step. It will help in simplifying the filing process when it comes to small business owners,” said Archit Gupta, CEO, ClearTax. “It would be more easy for them now to fill the two-pager 4S form,” he added. He also went on to state that this step is expected to increase government revenue. “With the decreased complexity, more people feel comfortable with filing the returns. This will increase the revenue of the government,” he said.

On the contrary, Riaz Thingna, Director, Grant Thornton Advisory, opined that it is a mere cosmetic change. “This is not a material change. What they have done is increased the slab. And, this Rs 1 crore slab has been there since many years,” he said. He also added that it will only increase the revenues of the government marginally.