Section 44AE: Special Provisions for Computing Profits & Gains of Business of Plying, Hiring or Leasing Goods Carriage

Applicable to whom ?

An assessee, who owns not more than 10 goods carriages at any time during the P.Y. and who is engaged in the business of plying, hiring or leasing such goods carriages.

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

Goods Carriage

What is Income under Sec.44AE ?  (i.e., Turnover as per Presumptive Taxation)

Old provision:-

According to old provision for computing deemed income under Sec.44AE there is no difference between heavy goods vehicle and Light goods vehicle, for every type of goods vehicle deemed income is Rs.7,500/- for every month or part of a month during which such vehicle is owned by the assessee for the previous year.

New Provision :-

Government will give a separate deemed income for Heavy goods vehicle & Light goods vehicle.

Q) Now what is Heavy goods vehicle ?

Ans) A vehicle whose gross weight is more than 12 Metric Tons (MT) is classified as Heavy goods vehicle.

 The estimated income for of heavy good vehicle( more than 12 MT Gross vehicle weight),the income will be deemed to be an amount equal to Rs. 1,000 per ton of gross vehicle weight or unladen weight, as the case may be, per month (or part of a month) during which such goods vehicle is owned by the assessee for the previous year

or

Amount claimed to have been actually earned from such vehicle, whichever is higher.

The estimated income from each goods vehicle, light goods vehicle (less than and equal to 12MT Gross vehicle weight), will be deemed to be amount equal to Rs.7,500 for every month or part of a month during which such goods vehicle is owned by the assessee for the previous year

or

Amount claimed to have been actually earned from such vehicle, whichever is higher.

Hence, if the actual income is higher than the presumptive rate, i.e., higher than ₹ 7,500 in case of light weight vehicle and 1000 per ton in case of heavy weight vehicle, then such higher income can be declared

Some Important points :-

  • Any deduction allowable under the provisions of section 28 to 43C shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed. Provided that where the assessee is a firm, the salary and interest paid to its partners shall be allowed as deduction subject to the conditions & limits of section 40(b).
  • Accordingly, the WDV of any asset used for business purpose of the assessee will be deemed to have been calculated as if the assessee had claimed & had actually been allowed the deduction in respect of depreciation for each of the R.A.Y.’s
  • Section 44AA & 44AB not applicable, i.e., The assessee opting for the scheme will not be required to maintain BoA u/s 44AA & get the accounts audited u/s 44AB in respect of such income.
  • Sec.44AE is not applicable, i.e., Where the assessee claims & produces evidence to prove that the profits and gains from the aforesaid business during the P.Y. are lower than ₹ 7,500, and the AO shall proceed to make an assessment of the total income or loss of the assessee and determine the sum payable by the assessee on the basis of assessment made u/s 143(3).
  • Section 44AA & 44AB applicability, an assessee may claim lower profits & gains than the deemed profits & gains specified in sub-sections (1) & (2), subject to the condition that the Books of Accounts & other docs are kept & maintained as required u/s 44AA(2)& the assessee gets his accounts audited u/s 44AB.

Following is the good example to compare the difference between old and new provision.

On April 1, 20xx, Prashanth owns 7 goods carriages (Tata Ace commercial vehicle, gross vehicle weight of each being 1285 kg.). On November 10, 20xx, he purchases 2 heavy goods carriages (Tata LPT, gross vehicle weight of each being 31,000 kg.). Income of DG under section 44AE will be calculated as follows-

Particulars Old New
Income from 7 light goods carriages ( 7500 *12*7) 6,30,000 6,30,000
Income from 2 heavy goods carriages-
  • Previous year 2017-18 (7500*5*2)
75,000
  • Previous year 2018-19 (1000*31 Ton *12*2)
7,44,000

Income Under Section 44AE

7,05,000 13,74,000

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