Section 44AE Presumptive Tax Scheme for Small Business of Goods Carriage


 Meaning of presumptive taxation scheme

This presumptive scheme is designed to give ease to small taxpayers” who engaged in the business of plying, hiring or leasing of goods carriages..

Various presumptive taxation schemes under Income Tax Act

There are three types of taxation schemes in Income Tax Act:

1) Section 44AD – Presumptive taxation scheme for BUSINESS : For detailed provision please refer earlier article “Section 44AD PROFIT AND GAIN OF BUSINESS ON PRESUMPTIVE BASIS“.

2) Section 44ADA – The presumptive taxation scheme for Professionals : For detailed provision you may refer earlier article “Section 44ADA Presumptive Tax Scheme for Professional

3) Section 44AE – The presumptive taxation scheme: The detailed provisions in this regard are as follows:

Eligible Assessee:

The presumptive taxation scheme of section 44AE can be adopted by every persons like;

  • Individual
  • Hindu Undivided Family (HUF)
  • Partnership Firm
  • Company, etc.

Unlike section 44AD,  in case of section 44AE there is no restriction on category of assessee.

Eligible Business:

The presumptive taxation scheme of section 44AE can be adopted by a person who is engaged in the business of plying, hiring or leasing of goods carriages and who does not own more than 10 goods vehicles at any time during the year.

* Important point an assessee engaged in the business of passenger transport cannot adopt benefits of this presumptive scheme.

Computation of Income:

  • Income will be computed @ Rs. 7,500 per month or part thereof during which the goods vehicle is owned by the taxpayer during the year.
  • Part of the month would be considered as full month.
  • The presumptive income computed @ Rs. 7,500 per vehicle per month is the final income and no further expenses will be allowed.

Particular

Amount

Income per month per goods vehicle

Rs. 7,500/-

No. of goods vehicles

7

Monthly income as per the provisions of section 44AE from 9 goods vehicles

52,500/-

5 Vehicle were owned for 11 Months

11 Months

2 Vehicle were owned for 11 Months and 15 Days

12 Months

Total income as per the provisions of section 44AE
5*11*7,500/-
2*12*7500/-

4,12,500/-

1,80,000/-

5,92,500/-

 

Provisions Relating to Maintenance of Books of Account and Audit Requirement:

An assessee adopting these provisions is not required to maintain the regular books of account and he is also exempt from getting the books of account audited.

  • The provision of section 44AA relating to MAINTENANCE OF BOOKS OF ACCOUNT will not apply.
  • Assessee need not get the accounts audited u/s 44AB

Provisions Relating to Various Allowances / Dis-allowances:

Income computed as per section 44AE will be net income for the business covered under this scheme.
All deductions from sections 30 to 38 including depreciation and un-absorbed depreciation / allowances shall be deemed as allowed year to year basis.
No dis-allowance can be made under sections 40, 40A and 43B.

Manner of Computation of WDV of Depreciable assets:

The WDV of any asset used in the business covered under section 44AE shall be calculated as if depreciation as per section 32 is claimed and allowed.

Declaration of Higher Income:

Payment of Advance Tax:

A person opting for the presumptive taxation scheme of section 44AE is also liable to pay advance tax

Declaration of Lower Income:

A person wants to declare his income at lower rate (i.e., at less than Rs. 7,500 per vehicle per month), then he is required to maintain the books of account as per the provisions of section 44AA and has to get his accounts audited under section 44AB.

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