Section 44AE of Income Tax Act: Presumptive Taxation for Transporters

Last Updated at: December 30, 2019
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All you need to know about Section 44AE of the Income tax Act

Section 44AE is covered under the Presumptive Taxation Scheme of Income-tax act, 1961. The presumptive taxation was introduced to give relief to small business or profession from the difficulty of maintaining books of accounts and getting their accounts audited.

Presumptive Taxation Scheme handles three different Sections – Section 44AD, Section 44ADA & Section 44AE

Any business person or professional adopting presumptive taxation can declare income at a prescribed rate and get complete relief from maintaining books of account and getting their accounts audited.

In this blog, we are going to learn the specifics of Section 44AE of the Income-tax act.

Section 44AE is designed to give relief to taxpayers, who own not more than 10 goods carriages at any time during the previous year and who are engaged in the business of plying, hiring or leasing of such goods carriages.

Who is eligible for this Scheme under Section 44AE?

The following persons are eligible the provisions for Section 44AE:

  1.     An individual
  2.     Hindu Undivided Family
  3.     Firm
  4.     Company

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

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  1. Who is not eligible for presumptive taxation scheme u/s 44AE?

The person who holds more than ten goods vehicles at any time during the year is not eligible and cannot take advantage of this scheme.

  1. How to calculate presumptive taxation under Section 44AE?

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

  1. How tax is calculated on a heavy goods vehicle?

Tax is calculated at the rate of Rs 1000 / ton of total vehicle weight for every month or part of the month during which the vehicle is owned by taxpayers.

  1. How tax is calculated on vehicles other than heavy goods vehicle?

Income will be calculated at the rate Rs 7500 for every month or part of the month during which the goods vehicles are owned by the taxpayer. 

Note:

  1.     Part of the month is calculated as a full month.
  2.     If the income is higher than the presumptive rate Rs.1000 (Heavy Vehicles) / Rs.7500 (Other than heavy Vehicles), then such income can be declared.
  3.     “Heavy Goods Vehicles” means a vehicle weights more than 12000 Kilograms.

Can taxpayers claim deductions as per Section 44AE?

In the case of a person opting for the presumptive taxation scheme of Section 44AE, the provisions of deductions will not apply and income will be calculated at a presumptive rate.

However, in the case of a partnership firm deduction can be claimed on account of remuneration and interest paid to partners.

No separate deduction is allowed on the account of depreciation. However, written down value (WDV) of any asset used in such business shall be claimed and has been actually allowed.

But, every assessee can claim deductions under Chapter VI-A.

Maintaining books of accounts:

A person engaged in business/profession has to maintain books of accounts of his business as per section 44AA.

But, if a person opts for a presumptive taxation scheme and declares income at a presumptive rate, then the provision relating to the maintenance of books of account will not apply.

  1.     Not need to maintain books of accounts under Section 44AA.
  2.     Not need to get accounts audited under Section 44AB.

If a person opts for presumptive tax under Section 44AE, then he is liable to pay advance tax from the business covered under Section 44AE.

And, if a person declares income at a lower rate than the prescribed one, then he needs to maintain books of accounts and get it audited as per Section 44AA and Section 44AB respectively.

 

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Section 44AE of Income Tax Act: Presumptive Taxation for Transporters

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Section 44AE is covered under the Presumptive Taxation Scheme of Income-tax act, 1961. The presumptive taxation was introduced to give relief to small business or profession from the difficulty of maintaining books of accounts and getting their accounts audited.

Presumptive Taxation Scheme handles three different Sections – Section 44AD, Section 44ADA & Section 44AE

Any business person or professional adopting presumptive taxation can declare income at a prescribed rate and get complete relief from maintaining books of account and getting their accounts audited.

In this blog, we are going to learn the specifics of Section 44AE of the Income-tax act.

Section 44AE is designed to give relief to taxpayers, who own not more than 10 goods carriages at any time during the previous year and who are engaged in the business of plying, hiring or leasing of such goods carriages.

Who is eligible for this Scheme under Section 44AE?

The following persons are eligible the provisions for Section 44AE:

  1.     An individual
  2.     Hindu Undivided Family
  3.     Firm
  4.     Company

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

Get free legal advice now

  1. Who is not eligible for presumptive taxation scheme u/s 44AE?

The person who holds more than ten goods vehicles at any time during the year is not eligible and cannot take advantage of this scheme.

  1. How to calculate presumptive taxation under Section 44AE?

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

  1. How tax is calculated on a heavy goods vehicle?

Tax is calculated at the rate of Rs 1000 / ton of total vehicle weight for every month or part of the month during which the vehicle is owned by taxpayers.

  1. How tax is calculated on vehicles other than heavy goods vehicle?

Income will be calculated at the rate Rs 7500 for every month or part of the month during which the goods vehicles are owned by the taxpayer. 

Note:

  1.     Part of the month is calculated as a full month.
  2.     If the income is higher than the presumptive rate Rs.1000 (Heavy Vehicles) / Rs.7500 (Other than heavy Vehicles), then such income can be declared.
  3.     “Heavy Goods Vehicles” means a vehicle weights more than 12000 Kilograms.

Can taxpayers claim deductions as per Section 44AE?

In the case of a person opting for the presumptive taxation scheme of Section 44AE, the provisions of deductions will not apply and income will be calculated at a presumptive rate.

However, in the case of a partnership firm deduction can be claimed on account of remuneration and interest paid to partners.

No separate deduction is allowed on the account of depreciation. However, written down value (WDV) of any asset used in such business shall be claimed and has been actually allowed.

But, every assessee can claim deductions under Chapter VI-A.

Maintaining books of accounts:

A person engaged in business/profession has to maintain books of accounts of his business as per section 44AA.

But, if a person opts for a presumptive taxation scheme and declares income at a presumptive rate, then the provision relating to the maintenance of books of account will not apply.

  1.     Not need to maintain books of accounts under Section 44AA.
  2.     Not need to get accounts audited under Section 44AB.

If a person opts for presumptive tax under Section 44AE, then he is liable to pay advance tax from the business covered under Section 44AE.

And, if a person declares income at a lower rate than the prescribed one, then he needs to maintain books of accounts and get it audited as per Section 44AA and Section 44AB respectively.

 

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