PRESUMTIVE TAXATION UNDER SECTION-44AE, SEC- 44AE OF INCOME TAX ACT

TAX ON PRESUMPTIVE BASIS IN CASE OF SMALL TAXPAYERS ENGAGED IN BUSINESS OF PLYING, HIRING OR LEASING OF GOODS CARRIAGES

To give relief to small taxpayers from the tedious job of maintenance of books of account and from getting the accounts audited, the Income-tax Act has framed the presumptive taxation scheme under sections 44AD, section 44ADA and section 44AE.

Meaning of presumptive taxation scheme

As per the Income-tax Act, a person engaged in business or profession is required to maintain regular books of account and further, he has to get his accounts audited. To give relief to small taxpayers from this tedious work, the Income-tax Act has framed the presumptive taxation scheme under sections 44AD, 44ADA and 44AE.

A person adopting the presumptive taxation scheme can declare income at a prescribed rate and, in turn, is relieved from tedious job of maintenance of books of account and also from getting the accounts audited.

For small taxpayers the Income-tax Act has framed three types of presumptive taxation schemes for different businesses as given below:

1) Presumptive taxation scheme under Section 44AD for Businesses other than Business of plying, hiring or leasing of goods carriages referred to in section 44AE.
2) Presumptive taxation scheme under Section 44ADA for Specified Professions.
3) Presumptive taxation scheme under Section 44AE taxpayers engaged in the business of plying, hiring or leasing of goods carriages.

Presumptive Taxation Scheme under Section 44AE

For whom the presumptive taxation scheme of section 44AD is designed?

The provisions of section 44AE are applicable to every person (i.e., an individual, HUF, firm, company, etc.).

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.

Manner of computation of taxable income in case of a person adopting the presumptive taxation scheme of section 44AE

In case of a person who is willing to opt for the presumptive taxation scheme of section 44AE, income will be computed on an estimated basis.

For Heavy Goods Vehicle, income will be computed at the rate of Rs. 1,000 per ton of gross vehicle weight for every month or part of a month during which the heavy goods vehicle is owned by taxpayer.

In case of vehicles other than heavy goods vehicle, income will be computed at the rate of Rs. 7,500 for every month or part of a month during which the goods carriage is owned by taxpayer.

Note 1 : If the actual income is higher than the presumptive rate, i.e., higher than Rs. 1,000/Rs. 7,500, then such higher income can be declared.

Note 2 : “Heavy Goods Vehicle” means any goods carriage having gross vehicle weight exceeding 12,000 kilograms.

Note 3 : Part of the month would be considered as full month.

For Example :

Mr. Ram is engaged in the business of plying, hiring or leasing goods carriages. He owned 5 heavy goods vehicle having gross weight of 13,000 kilograms and 4 other goods vehicle during the previous year 2021-22. What will be his taxable income as per the provisions of section 44AE?

Particulars Amount
No. of Heavy Goods Vehicles (HGV) 5
Gross Weight of Heavy Goods Vehicles (HGV) 13,000 Kg (13 MT)
Estimated income per Vehicle (HGV) every month 13 MT x Rs. 1,000 = Rs. 13,000
Estimated income all HGV for 2021-22 (A) 5 Vehicles x Rs. 13,000 Per Month x 12 Months = Rs. 7,80,000
No. of other Vehicles (OV) 4
Gross Weight of OTHER Vehicles (OV) Not Required
Estimated income per Vehicle (OV) every month Rs. 7,500 (Fixed)
Estimated income all OV for PY 2021-22 (B) 4 Vehicles x Rs. 7,500 Per Month x 12 Months = Rs. 3,60,000
Total Income from all Vehicles for PY 2021-22 (A+B) Rs. 7,80,000 + Rs. 3,60,000 = Rs. 11,40,000

 

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