Section 44AE: In India Income Tax is the self-assessed tax that is an assessee calculates his taxes on his own and discloses it to the government in an income tax return. So many businessmen of India tried to exploit it and used to disclose less income as compared to actual figures. To address this problem, Government of India introduced section 44AE, 44AD, and 44ADA which talks about mandatory minimum income disclosure for businessmen.
Section 44AE applies on the specific assessee carrying business of plying, hiring or leasing goods carriages, as per the provision the income of such business is chargeable under the head profit or gain from business or profession (PGBP) and on a presumptive basis.
Applicability of section 44AE
This scheme of presumptive taxation is applicable to all assesses (i.e., an individual, HUF, firm, company, etc.) who are engaged in the business of plying, hiring, or leasing goods carriages.
The eligible assessee must not own more than 10 goods carriages at any time in the financial year. If the goods carriages exceed 10, then assessee cannot disclose income under this section.
Read Also: Income Tax Filing for Freelancers
Amount of Income deemed as PGBP
Income tax has prescribed a minimum amount of income for disclosing under this section-
|Heavy Goods Vehicle
|Rs. 1,000 per tonne of gross vehicle weight, for every month or part of the month
|Other than heavy goods vehicle
|Rs. 7,500 per vehicle, for every month or part of the month.
Heavy Goods Vehicle- Any goods carriage, the gross weight of which exceeds 12,000 kgs or 12 tonnes.
Gross Vehicle Weight- The total weight of the vehicle, it is certified and registered by the registering authority.
Important Point for section 44AE
1. As per the provision of Section 44AE, the presumptive taxes are calculated for those months during which the vehicle is owned by the assessee. This implies calculation taxes starts right away for “date of purchase” of the vehicle, “put to use” does not matter.
2. Any other Expenses are NOT ALLOWED to be deduction including addition depreciation or unabsorbed depreciation.
3. Brought forward losses of the business are allowed to be adjusted.
4. Deduction of chapter VI (section 80C to 80U) is allowed as a deduction
5. If an assessee is declaring his income as per section 44AE the requirement relating to maintenance of books of accounts and audit of books of account is not applied.
6. Advance Tax is discharged in a normal way as mentioned in the Income tax provisions. Read more: Advance Tax liability : Calculation, Due dates, Interest
7. It should be noted that an assessee, being a partnership firm, can claim further deduction of remuneration and interest to its partners within the limit specified under section 40(b)
Example on 44AE
Mr.A owns a vehicle of 9 tonnes for 9 months and 15 days and he purchased another vehicle of 13 tonnes in December which was not put to use till the end of the financial year. Calculate Presumptive taxes U/S 44AE?
|9 tonnes vehicle
|7500 X 10 =75000
|13 tonnes vehicle
|1000 X 13 X 4 =52000
Total taxable income = 75000+52000= Rs 127000
Note: 1. Put to use does not matter.
2. 9 months 15 days taken as 10 months.
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The author of the above article is Aditya Kishore.
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