PPT on Presumptive Taxation under Income Tax Act

PRESUMPTIVE TAX

INTRODUCTION

Sections 44AD, 44ADA & 44AE

Introduced to help small business men, Traders and Professionals

i. Section 44AD – Small Business/Traders for Turnover up to Rs. 2 Crores

ii. Section 44ADA – Professionals – Gross receipts up to Rs. 50 Lakhs

iii. Section 44AE – Truck owners owning not more than 10 trucks

Sections 44B, 44BB, 44BBA, 44BBB, 44C, 44D, 44DA & 44DDB

Presumptive Taxation for Non-Residents

i. Section- 44B – Shipping

ii. Section 44BB – Exploration etc., of mineral oils.

iii. Section 44BBA – Operation of Aircraft

iv. Section 44BBB – Civil Construction etc., of certain power projects (in case of foreign companies)

v. Section 44C – Deduction of Head Office Expenses

vi. Section 44D & 44DA Royalty or Fees for technical services (in case of foreign companies and non-residents)

Sections 44DB for Co-operative Societies

Section 44DB – Reorganisation of Co-operative Banks 

Section 44AD – SMALL BUSINESS ASSESSEES

APPLICABILITY

From A.Y. 2011-12

Eligible Assessees

Resident Individuals, Resident HUFs and Resident Partnership Firms (not LLPs) engaged in any eligible business

Eligible Business does not include:

i. Business of Plying, hiring or leasing of goods carriages covered u.s 44AE

ii. Any profession referred to u.s. 44ADA

iii. Commission or Brokerage

iv. Agency Business

v. Turnover more than 2 Crores.

ESTIMATED INCOME

a. 6% of the Turnover received by account payee cheque/ bank draft or ECS before the due date of filing the return of income i.e. 31^st August

b. 8% of the turnover not covered above in (a) above.

NON ADMISSIBILITY OF BUSINESS DEDUCTIONS.

All deductions u.s 30 to 38 including depreciation – deemed to have been allowed.

NO DEDUCTION OF INTEREST AND SALARY TO PARTNERS

Up to A.Y. 2016-17 allowed

From A.Y. 2017-18 not allowed.

If salary and Interest received by partners whether taxable in their hands, though not allowed in firm’s hands?

DEDUCTION UNDER CHAPTER VI A ALLOWABLE

Deductions u.s 80C to 80 U are allowed.

BOOKS OF ACCOUNT NEED NOT BE MAINTAINED

No Books of Account – No Audit – Basic Records to be maintained – Cash memos/bills, Cash Book – to ascertain the turnover – to ascertain the receipts by cash or any other mode. Opening balances required for future years if the assessee returns to the normal computation provisions; w.d.v. is required for assets

LOWER INCOME MAY BE DECLARED

If lower income declared in subsequent year – not eligible to claim benefit of section 44AD for next five years.

If the total income exceeds the basic limit the accounts are to be necessarily audited u.s 44AB.

TAX LIABILITY AND ADVANCE TAX

Tax to be paid at applicable rates.

Advance tax to be paid on 15^th March in one instalment. 

Section 44ADA SMALL PROFESSIONALS

APPLICABILITY

Resident Assessee engaged in profession referred o in section 44 AA(1) –

Gross Receipts do not exceed Rs. 50 Lakhs.

For the following professionals referred to u.s 44AA(1):

i. Legal ii. Medical iii. Engineering iv. Architecture v. Accountancy vi. Technical Consultancy vii. Interior Decoration

Other notified Professions: a. Authorised Representative b. Film Artist c. Company Secretary d. Information Technology

From A.Y 2017-18 onwards

ESTIMATED INCOME

50% of Gross Receipts as professional income

Other income including business income if any, to be computed in the normal course.

NON ADMISSIBILITY OF BUSINESS DEDUCTIONS.

All deductions u.s 30 to 38 including depreciation – deemed to have been allowed.

NO DEDUCTION OF INTEREST AND SALARY TO PARTNERS

The scheme is silent about the Salary and Interest to partners; It is specifically not allowed in 44AD and allowed in 44AE.

If paid whether will be allowed? If not allowed whether can it be taxed in Partners’ hands

DEDUCTION UNDER CHAPTER VI A ALLOWABLE

Deductions u.s 80C to 80 U are allowed.

BOOKS OF ACCOUNT NEED NOT BE MAINTAINED

No Books of Account – No Audit – Basic Records to be maintained – Cash memos/bills, Cash Book – to ascertain the turnover – Opening balances required for future years if the assessee returns to the normal computation provisions; w.d.v. is required for assets

LOWER INCOME MAY BE DECLARED

Even if lower income declared in subsequent year, there is no restriction to come back to presumptive taxation in the subsequent years.

TAX LIABILITY AND ADVANCE TAX

Tax to be paid at applicable rates.

Advance tax to be paid on 15^th March in one instalment. 

SECTION 44AE TRUCK OWNERS

APPLICABILITY

Engaged in business of plying, leasing or hiring of trucks, owning not more than 10 trucks at any time during the year.

ESTIMATED INCOME

For A. Y. 2018-19

Rs. 7,500/- per month (or part thereof)

For A.Y. 2019-20

For Heavy Goods Vehicle– Rs. 1,000/- per month per ton.

(Heavy Goods vehicle means goods carriage with gross vehicle weight exceeding 12 tons)

For other goods vehicle – Rs. 7,500/- per month

NON ADMISSIBILITY OF BUSINESS DEDUCTIONS.

All deductions u.s 30 to 38 including depreciation – deemed to have been allowed.

DEDUCTION OF INTEREST AND SALARY TO PARTNERS

Salary and Interest to Partners allowed subject to limits specified u.s. 40b

DEDUCTION UNDER CHAPTER VI A ALLOWABLE

Deductions u.s 80C to 80 U are allowed.

BOOKS OF ACCOUNT NEED NOT BE MAINTAINED

No Books of Account – No Audit – Basic Records to be maintained – Cash memos/bills, Cash Book – to ascertain the turnover – Opening balances required for future years if the assessee returns to the normal computation provisions; w.d.v. is required for assets

LOWER INCOME MAY BE DECLARED

Even if lower income declared in subsequent year, there is no restriction to come back to presumptive taxation in the subsequent years.

TAX LIABILITY AND ADVANCE TAX

Tax to be paid at applicable rates as per normal provisions – Four Instalments. 

SECTION 44B – SHIPPING

Special provision for computing profits and gains of shipping business in the case of non-residents

7.5% of the amounts received for carriage of passengers, livestock, mail or goods shipped at any port in India or deemed to be received in India for any port outside India.

Section 44BB – Exploration etc., of mineral oils.

Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils. 

10% of the amounts received provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of mineral oils in India or deemed to be received in India for such services done outside India.

Section 44BBA – Operation of Aircraft

Special provision for computing profits and gains of the business of operation of aircraft in the case of non-residents.

5 % of the amounts received for carriage of passengers, livestock, mail or goods from any place in India and deemed to be received in India for such services done outside India.

Section 44BBB – Civil Construction etc., of certain power projects (in case of foreign companies)

Special provision for computing profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects.

10 % of the amounts received on account of such civil construction, erection, testing or commissioning shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.

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