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Section 44AE of the Income Tax Act deals with presumptive taxation. This scheme allows individuals to avoid the tedious and time-consuming process of maintaining books of accounts and calculating tax at a prescribed fixed rate. This article talks about the various aspects of income under section 44AE, examples etc.
Section 44AE of the Income Tax Act is an income scheme that the Income Tax Department introduced for small and medium enterprises. It is a presumptive income scheme under which individuals are not required to maintain their books of accounts or get them audited. Under the presumptive income scheme, taxpayers can calculate their income at a prescribed rate.
Amy small business organization engaged in the business of plying, hiring, or leasing goods carriage can apply for the presumptive income scheme under section 44AE. Partnership firms, HUFs and self employed individuals can also apply for section 44AE.
Unlike section 44AD, this section does not have any restriction as to which type of employee can opt for this scheme.
To qualify for the simplified tax calculations under Section 44AE of the Income Tax Act, you need to meet the following criteria:
Upon fulfilling the eligibility criteria, you can opt for the presumptive income scheme under section 44AE. Given below is the process of how to calculate presumptive income under Section 44AE -
According to Sections 30 to 38 of the Income Tax Act, choosing Presumptive Taxation means forfeiting the ability to claim deductions or exemptions. These allowances are accessible under Sections 80C to 80U. Under Section 44AE, taxable income is calculated as Rs 7,500 per vehicle per month.
If you're in a partnership firm, deductions for partner salaries and interests are claimable. However, depreciation deductions aren't applicable under Presumptive Taxation. Instead, depreciation claims under Section 32 of the Income Tax Act adjust the written-down value of business assets.
Businesses falling within Section 44AE's limits are relieved from maintaining account books or fulfilling its requirements. Conversely, if opting for Presumptive Taxation, taxes must be paid in advance, just like other taxpayers.
You cannot claim any deduction under section 44AE of the Income Tax Act. This also applies to the deduction for depreciation. However, depreciation can be calculated and deducted from its total value. You can also find the written-down value of the block of assets according to section 32 of the Income Tax Act.
If the assessee earns less income than the income calculated under the presumptive income scheme, then such assessee can claim the lower income, i.e., the actual income, if the assessee mandatorily maintains the books of accounts and gets them audited.
If the actual income of the assessee is higher than that calculated under section 44AE of the Income Tax Act, he/she can declare such income at their own discretion.
So, if you are eligible to opt for a presumptive income scheme, you can skip the difficulty of maintaining books of accounts and getting them audited. For any tax-related questions, you can contact our tax experts. Book Tax Consultation Call!
You are required to consider Rs. 7,500 per vehicle per month for each month the vehicle is owned by you, with any part of the month being treated as a full month. If your actual income exceeds the presumptive rate of Rs. 7,500, you have the option to declare the higher income as per your preference.
Section 44AE implements a presumptive income scheme for owners of goods carriages, which relies on the number of trucks owned and their gross vehicle weight (GVW). This scheme establishes a minimum income per truck per month, irrespective of the actual income generated.
Goods vehicles encompass a variety of types, such as lorries, vans, trucks, trailers, and others. On the other hand, Heavy Goods Vehicles (HGVs) constitute a distinct category within goods vehicles, characterized by a gross vehicle weight exceeding 12,000 kilograms.
The Gross Vehicle Weight Rating (GVWR) of a vehicle is indicated on the Safety Compliance Certification Label, typically found on the driver's side door lock facing or the door latch post pillar. This rating represents the maximum permissible weight of the fully-loaded vehicle, encompassing passengers and cargo.
In addition to the businesses previously mentioned, individuals engaged in a profession, as specified in section 44AA(1), are ineligible for the presumptive taxation scheme. Moreover, those earning income in the form of commission or brokerage cannot opt for the presumptive taxation scheme outlined in section 44AD.
The regulations outlined in section 44AE apply to various types of assesses, including individuals, Hindu Undivided Families (HUFs), and partnership firms. Unlike section 44AD, there are no particular limitations on the type of assesses eligible to choose this scheme.
