Section 44AE Presumptive Taxation Scheme for Plying, Hiring, or Leasing Goods Carriages

Presumptive Taxation Scheme for Plying, Hiring, or Leasing Goods Carriages – Section 44AE

For simplifying the complications involved in calculating the taxable income for small business owners, the Presumptive Taxation Scheme was construed under the Income Tax Act. Section 44AE offers this Presumptive Taxation scheme which allows for a system to estimate the income of assesses who are in the business of hiring, plying, or leasing goods carriages.

Small businesses which are engaged in the business of plying, hiring, or leasing goods carriages with no more than 10 goods carriage vehicles, can opt for this scheme. These provisions apply to individuals, Hindu Undivided Families, and partnership firms. 

How is Income calculated under Section 44AE

As per the Budget 2018, the tax under the Presumptive Taxation Scheme under section 44AE would be calculated as per the below guidelines:

• In the case of light goods vehicle (gross weight less than 12MT) – Individual who opt for presumptive taxation under Section 44AE, can compute their income at INR 7,500 per month for each vehicle they own. People opting for this scheme need to pay their taxes as per this computation.
• In case of heavy goods vehicle (gross weight exceeding 12MT) – Income will be calculated at INR 1,000/ ton of gross vehicle weight per month.

For instance, if Mahesh runs a business of plying, hiring, or leasing goods carriages with 8 light goods carriage vehicles, then Mahesh’s income would be INR 60,000 (INR 7,500 x 8) per month and INR 7.2 lakh per annum. If his actual income exceeds INR 7,500 per vehicle, he can furnish the same in his Income Tax Return.

It’s important to be noted that the net income computed as per the guidelines under Section 44AE, the assessee cannot claim any deduction in respect of their business income under Section 30 to Section 38 of the Indian Income Tax Act. However, in case the assessee is a partnership firm, deduction in respect of salary and interest paid to the partners could be claimed as per the norms of the Act. 

Is Depreciation Allowed as a Deduction?

Deduction with respect to depreciation isn’t allowed to an assessee opting for the Presumptive Taxation Scheme under Section 44AE. However, the WDV (Written-down value) of any asset which is used in the assessee’s business can be computed assuming the depreciation as per Section 32 was allowed and claimed.

Does a Taxpayer Opting for Presumptive Taxation Scheme under Section 44AE need to maintain books of accounts?

This Presumptive Taxation Scheme provides a great relief to the taxpayers in respect of maintaining the books of accounts. A taxpayer, who opts for this scheme, isn’t required to maintain the books of accounts, and also isn’t required to get a tax audit.

However, in case a taxpayer furnishes his income lower than the income so calculated under this scheme, such taxpayer needs to maintain his books of accounts in accordance with section 44AA and also needs his books to be audited under section 44AB.