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CS Executive · Tax Laws and Practice · Profits and Gains from Business and Profession

Suresh, an eligible assessee, declared presumptive profit under section 58 (Sl. No. 1) for a tax year. In a later tax year within the next five years he declares a lower profit than the presumptive rate, and his total income exceeds the maximum amount not chargeable to tax. What is the consequence under the Income-tax Act, 2025?

He cannot use the presumptive scheme for the next five tax years after the year of default, and since his total income exceeds the maximum amount not chargeable to tax, he must keep books of account and have them audited as required under sections 62 and 63.

  1. AHe is barred from the presumptive scheme for the five tax years subsequent to that year and must maintain books and get accounts auditedCorrect
  2. BHe is barred from the scheme for one year only and need not maintain books
  3. CHe may continue the scheme but must pay additional tax
  4. DHe loses the scheme permanently but need not get accounts audited

Explanation

Section 58(7) provides that declaring a lower profit within five succeeding years makes him ineligible for five tax years after the year in which profit was not declared as presumed. Section 58(8) then requires books of account under section 62 and audit under section 63 where total income exceeds the basic exemption limit. The other options misstate the period, the permanence or the audit duty.

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