Section 44AA mandates the maintenance of books of accounts by certain professionals and businesses, depending on their income, turnover, and the nature of business.

🏢 A. Specified professions include:

• Legal

• Medical

• Engineering

• Architecture

• Accountancy

• Technical consultancy

• Interior decoration

• Film artists

• Authorized representatives

• Company secretaries

• Information technology professionals

✅ Required to maintain books if:

As per Section 44AA(1):

“If gross receipts from such profession exceed ₹2,50,000 in any one of the three immediately preceding previous years.”

📘 Such professionals must maintain books as per Rule 6F (covered later below).

🏢 B. Businesses (Non-specified professions)

✅ Books required under Section 44AA(2) if:

• Income from business or profession exceeds ₹2,50,000 in any one of the 3 preceding years
  OR

• Turnover or gross receipts exceed ₹25,00,000 in any of the 3 preceding years

💼 C. Persons not covered above but opting out of presumptive taxation (Section 44AD/44ADA/44AE)

If the person:

• Declares income less than the presumptive rate
  AND

• Their income exceeds the basic exemption limit,
  ➡️ Books of account must be maintained.

Sumamry:

The key provision is Section 56(2) of the Act, which deals with transfers of property (including money) where consideration is not received or is less than the fair market value. The main points from this section include:

• Threshold Limit:
  If the aggregate value of gifts (money or property) received by an individual or a Hindu Undivided Family (HUF) in a financial year exceeds ₹50,000, the entire amount is taxable as income under “Income from Other Sources.”

• Exemptions:
  The Act provides specific exemptions in this regard. For instance:

  • Gifts from Specified Relatives: Any gift, whether in money or property, received from a relative is fully exempt from tax.

  • Gifts on the Occasion of Marriage: Money or property received on marriage is exempt, with no upper limit.

  • Inheritance or Will: Any property or money received as inheritance, by way of a will, or in contemplation of death is not taxable.

  • Other Notified Exemptions: Certain gifts received from local authorities, approved trusts, or other specified entities may also be exempt depending on the conditions notified by the Government.

As per  Section 56(2)):
“Where any person receives any money, movable property or immovable property without consideration, or where the consideration is less than the fair market value, if the aggregate amount exceeds ₹50,000 in a financial year, then such amount is chargeable to tax under the head ‘Income from Other Sources’, subject to the exemptions provided…”

Section 40(b) specifies that the remuneration to a partner may be allowed as a deduction if:

• It is provided for in the partnership deed or fixed as per a prior arrangement.

• It is calculated on a predetermined basis irrespective of the profits or turnover of the firm.

• The payment is made in advance or sanctioned for the relevant assessment year.

When Is Salary to a Partner Not Allowed?

The salary (or any form of remuneration) to a partner will be disallowed as a deduction under the following circumstances:

1. 1. Not Provided for in the Partnership Deed:
      If the partnership deed does not expressly authorize or specify the payment of salary to the partner, any such payment made by the firm is not in line with the agreed terms and, therefore, will not be treated as an allowable deduction.

   2. Excessive or Arbitrary Payment:
      Even if a salary is mentioned in the partnership deed, if the firm pays an amount that exceeds the rate or limits fixed by the deed (or as per the conditions prescribed under Section 40(b)), the excess portion of the salary will be disallowed. The Act expects the remuneration to be predetermined and not subject to arbitrary increases.

   3. Non-Compliance with the Prescribed Formula:
      The Act mandates that the salary should be computed on a fixed formula (or rate) as stipulated in the deed, without being linked to the fluctuating profits of the firm. If the payment deviates from this method – for example, if it is linked directly to profits, thereby possibly distorting the firm’s taxable income – the deduction may be disallowed to the extent of the deviation.

No, you cannot claim additional deductions for business expenses like rent, salary, office expenses, etc., when opting for the presumptive taxation scheme under Section 44ADA.

✅ As per Section 44ADA(2), the 50% of gross receipts deemed as income already accounts for all expenses related to the profession.

🚫 Depreciation under Section 32 is NOT allowed separately.
✅ However, the written-down value (WDV) of assets will be considered after reducing deemed depreciation.

What Deductions Are Still Allowed?

✅ Deductions under Chapter VI-A (like 80C, 80D, 80G, etc.) CAN be claimed.

✅ Some common deductions that can be claimed separately:

• Section 80C: Investments in PPF, ELSS, Life Insurance Premium, EPF, etc. (Max ₹1.5 lakh)

• Section 80D: Medical insurance premium paid for self & family (up to ₹25,000/₹50,000 for senior citizens)

• Section 80E: Interest on education loan

• Section 80G: Donations to charitable institutions

• Section 80TTA: Interest on savings bank account (up to ₹10,000)

Requirement to Maintain Books of Account & Audit

📌 Case 1: If Income Declared is 50% or More
✅ No requirement to maintain books of account under Section 44AA.
✅ No requirement for tax audit under Section 44AB.

📌 Case 2: If Income Declared is Less Than 50%
❌ Books of account must be maintained as per Section 44AA.
❌ Audit under Section 44AB is required if total income exceeds the basic exemption limit (₹2.5 lakh/₹3 lakh/₹5 lakh as per age category).