Archive · 3 Sep 2025
Taxpayers Face Scrutiny Over TDS Mismatch with Presumptive Taxation
Some taxpayers are getting a closer look from the tax department.
This is because the tax deducted from their payments (Section 194J) doesn't always match the tax scheme they're using (Section 44AD or 44ADA).
Section 44AD is for small businesses, while 44ADA is for specific professionals like doctors.
The tax department wants to make sure people are using the right scheme.
If your business is eligible for 44AD, you can still use it even if taxes were taken out under Section 194J.
You just need to explain your business, provide proof, and reconcile records.
Tax experts say it's a hassle, but not a cause for panic if you can show you're following the rules.
Taxpayers face increased scrutiny from the Income Tax Department due to mismatches in TDS and chosen tax schemes.
The issue arises when TDS is deducted under Section 194J but income is declared under Section 44AD instead of 44ADA.
Section 44AD applies to businesses; 44ADA applies to specified professionals with certain income limits.
Section 194J mandates TDS on professional fees but doesn't restrict which tax scheme a taxpayer must use.
Taxpayers should clarify the nature of their business and provide documentation to resolve mismatches.
- Who
- Taxpayers and the Income Tax Department
- What
- Scrutiny of taxpayers due to a mismatch between TDS under Section 194J and the presumptive taxation scheme chosen in their income tax return
- When
- Ongoing, as highlighted by tax experts in September 2025
- Where
- Not specified, but relevant to taxpayers in India
- Why
- To ensure correct application of tax rules and prevent tax avoidance due to mismatched reporting.
- Sections in Question
- 44AD, 44ADA, and 194J
- 44AD Eligibility
- Businesses with turnover up to Rs 2 crore (Rs 3 crore with digital receipts)
- 44ADA Applicability
- Specified professionals with receipts up to Rs 75 lakh
- 44AD Income
- Presumed at 8% of turnover (6% for digital payments)
- 44ADA Income
- Presumed at 50% of gross receipts
- 194J Impact
- TDS deducted on professional fees doesn't automatically dictate tax section