• Mar
  • 11
  • 2014

Presumptive taxation under Sections 44AD, 44AE and 44AF

Sections 44AD, 44AE and 44 AF cover special provisions of computing profits on a presumptive basis. All the schemes are optional at the discretion of the assessee. Conditions and manner of computation common to all three sections are given at the end after specific provisions applying to each section.

A. Section 44AD – Presumptive computation of profits for taxation for business

(Provisions as Applicable from A.Y. 2011-12, the old provisions pertaining to Section 44AD will continue to apply till March 2010)

1] Applies to:

Any eligible assessee engaged in an eligible business. Eligible assessee is defined as an individual, HUF, resident partnership firm, but excludes an LLP under the LLP Act, 2008 and any assessee who has claimed a deduction under sections 10A, 10AA, 10B, 10BA or heading C of Chapter VIA (sections 80I-A, 80-IB, etc.). An eligible business means any business other than the business of plying, hiring, or leasing of goods carriage as given in section 44AE and whose turnover/gross receipt in the previous year does not exceed Rs. 60,00,000 in A.Y. 2011-12 and 2012-13 and Rs. 1,00,00,000 in AY 2013-14 or in Year Succeeding the AY 2013-14.

2] Deemed Income:

8% of the total turnover or gross receipts of the assessee on account of such business or any higher amount voluntarily declared by him shall be deemed to be his income chargeable to tax.

Refer to ‘A] Conditions’ and ‘B] Computation’ below.

Provisions of Chapter XVII C relating to Advance Payment of taxes will not apply to the eligible assessee in respect of eligible business only.

C. Section 44AE – Business of plying, leasing or hiring trucks

(Applicable till A.Y. 2010-11, this section is amended from A.Y. 2011-12 details of which are given in paragraph D)

1] Applies to:

Any person engaged in the business of plying, leasing or hiring of trucks if he owns not more than 10 goods carriages at any time during the previous year including those taken on hire purchase or on instalments. This scheme does not apply to those who operate trucks on hire without owning them (Circular 684, dt. 10-6-1994)

2] Income:

Type of Goods Carriage Estimated Income
Heavy Goods Vehicle Rs. 3,500 for every month (or part of a month) during which the goods carriage is owned by the taxpayer.
Other than Heavy goods vehicle Rs. 3,150 for every month (or part of a month) during which the goods carriage is owned by the tax-payer.

Refer to ‘A] Conditions’ and ‘B] Computation’ below.

D. Business of plying, leasing or hiring trucks – Section 44AE

(Applicable from A.Y. 2011-12, the old provisions pertaining to Section 44AE will continue to apply till March 2010)

1] Applies to:

Any person engaged in the business of plying, leasing or hiring of trucks if he owns not more than 10 goods carriages at any time during the previous year including those taken on hire purchase or on instalments. This scheme does not apply to those who operate trucks on hire without owning them (Circular 684, dt. 10-6-1994)

2] Deemed Income:

Type of Goods Carriage Estimated Income
Heavy Goods Vehicle Higher of Rs. 5,000 for every month (or part of a month) during which the goods carriage is owned by the tax-payer or an
amount actually earned from such vehicle.
Other than Heavy goods vehicle Higher of Rs. 4,500 for every month (or part of a month) during which the goods carriage is owned by the tax-payer or an
amount actually earned from such vehicle.

Refer to ‘A] Conditions’ and ‘B] Computation’ below.

E. Section 44AF – Business of retail trading of goods

(Applicable till A.Y. 2010-11, this section will become inoperative from AY 2011-12 and the retail traders can choose to be governed by section 44AD from A.Y. 2011-12 which requires presumptive income at 8% of gross receipts/turnover)

1] Applies to:

Any person engaged in the business of retail trade in any goods or merchandise shall be covered by this provision. If his turnover from the above business do not exceed Rs. 40 lakhs.

2] Deemed Income:

5% of the total turnover of such person or a higher sum voluntarily declared by him shall be deemed to be his income from such business.

Refer to ‘A] Conditions’ and ‘B] Computation’ below.

Common Conditions and Computation method:

A. Conditions:

All deductions u/s. 30 to 38 including depreciation deemed to be allowed. No further deduction allowed under those sections.

The written down value of asset used in the business will be computed as if depreciation, as applicable, was allowed.

It will be assumed that disallowances if any u/ss. 40, 40A and 43B were considered by calculating the income estimated in 2] above.

In the case of a firm, the deduction in respect of salary and interest to partners u/s. 40(b) will be allowed.

In respect of this business the assessee is not required to maintain books of account as per the provisions of s. 44AA.

The assessee is not required to get the books of account audited u/s. 44AB in respect of the above business.

If the assessee wants to declare lower income than the deemed profits as calculated above, he will have to maintain the books of account as per s. 44AA and get the accounts audited as per s. 44AB irrespective of turnover if his total income exceeds basic exemption limit.

B. Computation:

The income calculated above shall be aggregated with income from any other business or other heads of income under the other provisions of the Income-tax Act.

The brought forward business losses and other losses will be deducted.

All deductions u/ss. 80CCC to 80U shall be allowed

NOTE:

1. The profit and loss from related businesses covered by sections 44B, 44BB, 44BBA, 44BBB, namely Shipping business in case of non-residents, Business of exploration, etc. of mineral oils, Operation of aircraft in case of non-residents, Foreign companies engaged in the business of civil construction, etc., in certain turnkey projects are not covered here as they have lower relevance and usage.

2. Year wise limit for section 44AB tax audit from financial year 2009-10 is given here under .
SR N0
FINANCIAL YEAR
LIMIT (BUSINESS)
PROFESSIONAL
1
2009-10
  40   LAKH
10 LAKH
2
2010-11,2011-12
  60   LAKH
15 LAKH
3
2012-13 ONWARDS
100 LAKH
25 LAKH

Related Post – Tax Audit Limit raised to One Crore for business & 25 Lakh for Profession

(Republished with amendments)


41 Responses to “Presumptive taxation under Sections 44AD, 44AE and 44AF”

  1. Ashish rathi says:

    Notwi thstanding an y t h i n g con t ai n ed i n t h e f oreg oi n g prov i si on s of t h i s sect i on , an el i g i bl e assessee wh o cl ai m s t h at
    h i s prof i t s an d g ai n s f rom t h e el i g i bl e bu si n ess are l ower t h an t h e prof i t s an d g ai n s speci f i ed i n su b- sect i on (1) an d
    wh ose t ot al i n com e ex ceeds t h e m ax i m u m am ou n t wh i ch i s n ot ch arg eabl e t o i n com e- t ax , sh al l be requ i red t o
    keep an d m ai n t ai n su ch books of accou n t an d ot h er documen t s as requ i red u n der su b- sect i on (2) of sect i on
    44AA an d g et t h em au di t ed an d f u rn i sh a report of such au di t as requ i red u n der sect i on 44AB.
    ◊Th i s su bsect i on t al ks of two cu m u l at i v e con di t i on s f or appl i cabi l i t y of 44AA an d 44AB: -i . Th e In com e f rom el i g i bl e bu si n ess i s l ower t h an 8% of Tu rn ov er or Gross Recei pt s,
    AND
    i i . Th e “ TOTAL INCOME” ex ceeds t h e m ax i m u m am ou n t n ot ch arg eabl e t o t ax .
    MY QUESTION : DOES TDS PROVISION ARE APPLICABLE TO ASSESSEE AT TIME OF FIRST
    YEAR OF TAX AUDIT ?

  2. Nirupama Bhat says:

    I have leased a car to company for use of their employees.
    What is the income I have to show u/s 44AE while filing returns. Is it @ 4150 per month or actual, which is 15000 per month

  3. manas says:

    Dear Sir,

    I have a income on commission in insurance policy and also done share trading and income from salary .so please tell which ITR is for me.

  4. B D Bendale says:

    Sir
    Since I am getting professional fee for offering civil technical consultancy
    services, can I opt for using ITR 4 Sugam under presumptive income. if not which ITR form shall be used for submission.

  5. SANTOSH KUMAR SHUKLA says:

    Dear Sir,
    I am an individual assessee have a demate account.I have made sale & purchase of share in our demate account and suffer a loss.Please suggest me whether we have to get audit of our demate account having turnover 42 Lac Approx.Is 44AD section will apply in our case.
    Please.

  6. ANKIT says:

    i had an income of rs 165900/ from fees from professional or technical services (194) wihch itr do i file for the AY 14-15 (4 OR 4S) FOR getting refund

  7. velanakul says:

    Taxable Turn Over U/S 2 (34) : rule of the value added tax rule 2005, provides deathl guidelines to determine taxable turnover on which a dealer is liable to remit ….

  8. shridhar says:

    if a person turnover is 1000000 which itr he should file, if his business is wholesale

  9. shridhar says:

    Any person engaged in the business of retail trade in any goods or merchandise shall be covered by this provision. If his turnover from the above business do not exceed Rs. 40 lakhs.

    Is it 40 Lakhs or 60 Lakhs for AY 2012-13 ?

  10. chandan says:

    can a medicine profesional(doctor) file return form 4s

  11. shailendra panwar says:

    Dear Sir,
    I have purchased a JCB machine in Feb 14 financed by Tata Capital Ltd.,Kindly suggest me under which section the income from operation of JCB will be taxed . it will cover under which section of presumptive taxation scheme under section 44AD , 44AE or 44 AF and what will be the monthly estimated income. I have income from other sources also i.e from Salary and other business.

    Please advice me.

    Thanks & Regards

    Shailendra panwar
    mobile 9826806009

  12. aasif says:

    i want to know about 44ad section, and want know name of particular businesses which allow under this section

  13. jitendrasinh says:

    MY CASE IS OPEN FOR SCRUTINY ON THE BASIS OF CASS FOR CASH DEPOSIT INTO A BANK ACCOUNT. I HAD 5 TRUCKS & THE RETURN FILED U/S 44AE I AM ALSO SHWON INCOME 44AD PROFIT (8%) AND U/S 44AE.
    MY QUESTION IS WHETHER THE ASSESSING OFFICER ASK ME TO FURNISH THE BOOKS OF ACCOUNT, DETAILS OF MY BANK ACCOUNT & SOURCES OF CASH DEPOSITED INTO BANK.

  14. Nilesh says:

    i am manufacture and supplier of goods and i own 3 trucks so i have income under both sec 44AD and 44AE . so ho should i calculate my income ? which ITR to be filled ? my total turnover is around 70 lakhs

  15. PIYUSH says:

    I have business income from Rent a cab i.e. hiring a motor car. i have shown profit around 9% to 10%. under which section i have to file my return is it U/s. 44AD or 44AE.

  16. Prashant Jain says:

    In case of a partnership firm is 8% of turnover to be calculated after remuneration and interest of partners or before.
    Please Advise.

  17. MAULIK PANKHANIYA says:

    to ajinkya modak
    it is possible
    you can declare profit of 8 %
    but you have to show other profit as unsecured loan and lower amt as a gift from persons …

  18. NISHITH says:

    MY CLIENT HAVE 7 TRUCKS.HIS GROSS RECEIPT OF CARTING INCOME IS APPROX.1.20 CRORE,
    HE IS REXDY TO SHOWN INCOME 60000/-PER TRUCK.AS GROSS RECEIPT IS EXCEDDING RS.1.00 CRORE TAX AUDIT REQUIRED?

  19. AM says:

    I am involved in research based software development for a client in US and I send them monthly invoices in USD. I have been given to understand that ITR-4S is the most suitable return for me. Could you please confirm which ITR should I file, ITR-4S or ITR-4? Thanks.

  20. jyoti says:

    wud like to thank for specisal provisions realting to44………..

  21. PARTHA PRATIM MANDAL says:

    sec44AE ACT

  22. Dinesh Purohit says:

    Sir, i am dong service in pvt sect. and i am getting salary in cash @20000 pm, so which itr i have to fill and how. plz it is urgent

  23. PARV says:

    THE DOCTOR SHOULD USE ITR 4 WHETHER HE OPERATE THE CLINIC FROM RESIDENCE OR ELSEWHER.

  24. PARV says:

    TO SREE DEVI:- PRESUMPTIVE INCOME U/S 44AD FOR HEAVY GOODS VEHICLE WILL BE 5000 FROM AY 2011-12, UPTO AY 2010-11 THERE WAS 3500/- TO BE SHWON PER VEHICLE PER MONTH

  25. V K Varma says:

    What income tax form will a doctor use who carries out his practice from his residence

  26. sreedevi says:

    what is the presumptive income of heavy good vehicle rs.5000 or rs.3500

  27. DAVID says:

    There is a partnership firm and is engaged in Transportation activity on hire and billing done. Is this firm eligiable for presumptive taxation as per section 44AD. Pl guide.

  28. NIDHI says:

    I would like to confirm that if Net profit of a businessman is less than 8% and his sales are also less than 60 lacs. But his profit is less than maximum exemption limit, whether he is required to conduct tax audit of his accounts.

  29. CA Santosh Amte says:

    as per provisions of section 44 AE it is clear that assessee is not required to maintain Books of A/cs so ITO is not authorised to ask about Books of A/c but for the purpose of ehther the limit mentioned in section 44 AE ie 60 lacs deposited in to saving a/c then this section has not any Relevance . so as per the explanation given in said comment communicate the provisions of sec 44 AE to ur ITO .

    Regards

    CA Santosh Amte
    9403585213/ 9923103382

  30. SANTLAL PATEL says:

    MY CASE IS OPEN FOR SCRUTINY ON THE BASIS OF CASS FOR CASH DEPOSIT INTO A BANK ACCOUNT. I HAD TWO TRUCKS & THE RETURN FILED U/S 44AE I AM ALSO PARTNERSHIP FIRM WHERE I GOT THE REMUNERATION & INTEREST. WHILE FILING THE RETURN I HAD SHOWN BOTH THE INCOME i.e SHRE IN PROFIT OF THE FIRM & U/S 44AE.
    MY QUESTION IS WHETHER THE ASSESSING OFFICER ASK ME TO FURNISH THE BOOKS OF ACCOUNT, DETAILS OF MY BANK ACCOUNT & SOURCES OF CASH DEPOSITED INTO BANK.

  31. Shilpa says:

    Section 44AF – Business of retail trading of goods
    (Applicable till A.Y. 2010-11, this section will become inoperative from AY 2011-12 and the retail traders can choose to be governed by section 44AD from A.Y. 2011-12 which requires presumptive income at 8% of gross receipts/turnover)

    1] Applies to:
    Any person engaged in the business of retail trade in any goods or merchandise shall be covered by this provision. If his turnover from the above business do not exceed Rs. 40 lakhs.

    Is it 40 Lakhs or 60 Lakhs for AY 2011-12 ?

  32. Rustom says:

    If the turnover exceeds the limit in 44AB for Fy2010-11, and the business is that specified in 44AE. Is the Audit applicable??? Is it allowed to estimate the income on presumptive basis of 44AE??
    Please give your answer with reasonable reason

  33. Savio Zuzarte says:

    I would like to confirm the term “Total Income” u/s 44AD. Under Sub Section 5, if the profits declared is less than 8% AND total income exceeds the maximum limit, than audit is required. My Question is if Business Loss is Rs. 20,000 and Income from Other Sources is Rs. 1,90,000, What will be the TOTAL INCOME of that person and whether he has to go for AUDIT?

  34. advocate veeresh says:

    44AD of IT is applicable to whosale traders

  35. CWA Ritesh says:

    hi
    veeresh

    44 of IT act is related to insurance business only
    44AF is related to retail business only B.code 0202

  36. veeresh says:

    44AF of IT is applicable to wholesale business

  37. veeresh says:

    44 af Of IT is applicable to wholesale business

  38. Harish Bansal says:

    Since it is clearly specified through your bank accounts that you have earned 18 lakh Rs during the P/Y 10-11, i suppose you should show your income as same as is your bank account. On the other hand, since law has specified that if assessee voluntarily wants to assess more income than the presumptive taxation as in your case 8% of rs. 50 lakh i.e. Rs. 4 lacs, assessee could show. The word voluntarily has been used. So untill you are covered in assessment by the department, you can show your income equal to presumptive income.

  39. Anandkumar says:

    Section starts with wording Notwithstanding anything to the contrary contained in sections 28 to 43C and states that PGBP is deemed to profit calculated as per section 44AE. therefore all the expenses are deemed to have been allowed and hence no question of Depreciation allowance under section 32

  40. turnover of assessee for FY 2010-11 (AY 2011-12) = Rs 50lakhs,, actual profits = Rs 18lakhs which is reflected in bank accounts,, however assessee wants declare income as per 44AD (8%) ,, can he do so??

  41. HARENDRA KR GUPTA says:

    what is applicable depreciation u/s 44AE, if yes, pls sent computaion and no than same

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