Often lot of individuals or sometimes even CAs while filing Income tax return does the mistake of showing Google AdSense Income under Presumptive Taxation(Section 44AD). It is very important for someone to understand the provisions of Section 44AD otherwise it might attract defective notices from Income tax office and you might end up in paying penalty as well. So one should know both the list of incomes which can be shown and which cannot be shown under Presumptive taxation. You can also check FAQs given on Income Tax official website to know more about Presumptive Taxation Scheme.
Can you show AdSense Income under Presumptive Taxation (Section 44AD)?
Let's first understand to whom the provisions of Section 44AD are applicable. This provision is basically applicable to all resident individual, HUF and Partnership Firm. Under this provision, you also should be paying Advance tax once in a year, i.e on 15th March. You also do not need to maintain any books of account under this provision. Till Financial year 2022-23, Section 44AD applies to all eligible whose sales were Rs2 crore or less.
But from this financial year, i.e 2023-24, this limit has been increased to now Rs3 crore. Under the provision of Section 44AD, you also need to consider 8% or 6% of the sale as net profit. If you want to show even lesser profit then in that case you need to perform tax audit through CA(Chartered Accountant).
Now let's understand which of the business peoples are allowed to file return under Section 44AD. Here are few of the examples:-
- Stationery Shop
- Garments Business
- Provisional Stores
- Wholesale Shops
- Retail Shops
- General Stores
- Vehicle Spare parts shop
- Confectionary Shops, etc.
Also let's look at some of the businesses which are ineligible to apply under Presumptive Taxation of Section 44AD:-
- All Incomes earned from Commissions
- Youtubers or Bloggers
- Google AdSense Income
- Income from Brokerage
- Income from Agency
- Medical store
- Commission earned from LIC
- Medical or Health Insurance
- Property Dealers
- Movie actors
- Private Limited Company
- Public Limited Company
- Limited Liability partnership
If you are eligible to file under Section 44AD then you need to understand about one of the drawback this section has. If have file ITR under this section for the first time time then for the next 5 years you have to file ITR in this section. But in case if you fail to file ITR under Presumptive taxation for next 5 years then according to the law you cannot file ITR under Presumptive taxation for next 5 years. In that case you need to do accounting and maintain the balance sheet of profit and loss and other ledgers. After that you need to file your return in normal ITR3.
Where to Apply
Now the real question comes, if you cannot apply AdSense income under Presumptive Taxation then where is that you can apply. As per my understanding, if you are a salaried individual and has an extra income from Google AdSense and you have to fill ITR3 due to speculative income then you can show it under Schedule Other Sources in which you can show the income from other sources just like below. Hope this helps!!