In Income Tax Act,1961, Presumptive taxation Income is concept where a person adopting the presumptive taxation scheme can declare income at a prescribed rate and get relieved from job of maintenance of books of account and from getting the accounts audited.These are easy to comply.
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The main problems arises is people cannot find the differences between the three presumptive concepts under Section 44AD, 44ADA and 44AE of Income Tax Act,1961. Misinterpret the three and file the income tax returns and then the government bombards them with notice. Therefore, its must for a income tax filler to have the knowledge of differences between them.
FAQs on Sales Return under GST
Points |
Sec. 44AD |
Sec. 44ADA |
Sec. 44AE |
| Deemed Minimum Income
|
Receipt in Cash – 8% of Sale or gross receipts.
Receipt Other than Cash– 6% of gross receipts.
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50% of value of receipts
|
Light Vehicle: 7500 per month per vehicle.
Heavy Vehicle : 1000 per ton of weight per vehicle |
| Applicability
|
A Resident
-individual, -HUF and -partnership firm (not LLP)
Engaged in any business who have not claimed deductions u/s 10A/10AA/10B/10BA or 80HH to 80RRB for the relevant year.
|
Person engaged in specified profession being the following:
1. Legal; 2. Medical; 3. Engineering or architectural; 4. Accountancy; 5. Technical consultancy; 6. Interior decoration; 7. Any other profession as notified by CBDT. |
Applicable to every person (i.e., an individual, HUF, firm, company, etc.).
|
| Condition
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Total turnover or gross receipts from the business does not exceed Rs. 2 crores
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Total gross receipt does not exceed Rs. 50 lakh
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Person does not own more than 10 goods vehicles at any time during the year. |
| Not applicable to
|
|
Other than specified profession
|
–
|
| Advance Tax
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Whole amount of advance tax is payable on or before 15th March and no separate quarterly dates are specified.
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Whole amount of advance tax is payable on or before 15th March and no separate quarterly dates are specified.
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Advance Tax is required to be paid in four installments of 15%, 45%, 75% and 100% of tax payable as everyone else.
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Income Tax Website Provides the calculator for calculation of presumptive income. The link for the same is given below.
For Section 44AD-https://www.incometaxindia.gov.in/Pages/tools/presumptive-income-under-section-44AD.aspx
For Section 44AE-
https://www.incometaxindia.gov.in/Pages/tools/presumptive-income-under-section-44AE.aspx
Examples of Computation of Income under Various schemes
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Manner of computation of taxable business income under the normal provisions of the Income-tax Act
| Particulars | Amount (in Rs. ) |
| Turnover or gross receipts from the business | 15,00,000 |
| Less : Expenses incurred in relation to earning of the income | 5,00,000 |
| Taxable Income | 10,00,000 |
-
Manner of computation of taxable business income u/s 44AD of the Income-tax Act
| Particulars | Amount (in Rs. ) |
| Turnover or gross receipts from the business (Less than 2 crore) | 15,00,000 |
| Presumptive Taxable Income | |
| If Receipt in Cash – 8% of Sale (15,00,000 x 8%) | 1,20,000 |
| If Receipt Other than Cash- 6% of Sale (15,00,000 x 6% ) | 90,000 |
Full Guidance on Tax Deducted at Source (TDS) under GST
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Manner of computation of taxable business income u/s 44ADA of the Income-tax Act
| Particulars | Amount |
| Gross receipts from the specified business (Less than 50 lakhs) | 15,00,000 |
| Presumptive Taxable Income – @50% of Gross Receipts | 7,50,000 |
-
Manner of computation of taxable business income u/s 44AE of the Income-tax Act
| Particulars | Amount |
| Gross receipts from the business | 15,00,000 |
| Number of vehicle owned | |
| Heavy Vehicles whole year (Each of 13000 kg or 13 tons) | 4 |
| Light Vehicles for 6 months | 3 |
| Presumptive Taxable Income | |
| Heavy Vehicles (13 x 1,000 x 4 x12) | 6,24,000 |
| Light Vehicles (7,500 x 3 x 6) | 1,35,000 |
| Total presumptive Income | 7,59,000 |
Advance received under GST and related FAQs
IMPORTANT POINTS TO NOTE
- No Expenses of Business: No further expenses will be allowed even on account of depreciation on opting any of the three schemes. However, the written down value of any asset used in such business shall be calculated as if depreciation as per section 32 is claimed and has been actually allowed.
For Example, Machine of value Rs.1,50,00 after charging depreciation @15% (Rs. 1,50,000 x 15%=22,500) will be shown at Rs. 1,27,500 ( 1,50,000-22,500). However no deduction for depreciation can be claimed on opting any of presumptive taxation schemes.
Note : In case of Section 44AE, further deduction can be claimed on account of remuneration and interest paid to partners (computed as per the Income-tax Act).
FAQ on Goods Transport Agency
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- Income at the higher rate: Person opting for any of the presumptive tax scheme can declare higher income than the deemed minimum income.
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- Income at the Lower rate: Person can declare income at a lower rate. However, if you do so, and your income exceeds the basic exemption limit, then you will be required to maintain the books of accounts u/s 44AA and to get your accounts audited u/s 44AB.
- Discouraging provision: In case of 44AD, A discouraging provision has also been introduced with the Budget 2016 i.e. if you opt for this scheme then you are required to follow the same for the next 5 years and in case, you fail to do so, then presumptive taxation scheme will not be available to you for the next 5 years. In such a case, you will also be required to keep and maintain books of account and get your accounts audited. For example, if you opt for this scheme in FY 2017-18, 2018-19 and 2019-20, but not in 2020-21, then you will not be eligible to claim the benefit of presumptive taxation scheme for the next five years i.e. from FY 2021-22 to 2025-26.
Sale of Old Used Car
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- 6% under section 44AD: In order to promote digital transactions and to encourage small unorganized business to accept digital payments, section 44AD is amended with effect from the assessment year 2017-18 to provide that income shall be computed at the rate of 6% instead of 8% if turnover/gross receipt is received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date of filing of return.
- Advance Tax: Any amount paid by way of advance tax on or before 31st day of March shall also be treated as advance tax paid during the financial year ending on that day.
- “Heavy Goods Vehicle” means any goods carriage having gross vehicle weight exceeding 12,000 kilograms. For Heavy Goods Vehicle, income will be computed at the rate of Rs. 1,000 per ton of gross vehicle weight for every month or part of a month during which the heavy goods vehicle is owned by taxpayer. In case of vehicles other than heavy goods vehicle,income will be computed at the rate of 7,500 for every month or part of a month during which the goods carriage is owned by taxpayer. Part of the month would be considered as full month.
- Income Tax Return Form : The ITR-4 Form is the Income Tax Return form for those taxpayers, who have opted for the presumptive income scheme as per Section 44AD, Section 44ADA and Section 44AE of the Income Tax Act.
- Deductions U/S 80C to 80 U: The deductions from section 80C to 80U are allowed for presumptive incomes also.
- Summary of account balances : Full balance sheet is not required but the summary of Debtors, creditors, cash and other liabilities is required.
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