What is Section
44AE of The Income Tax Act, 1961?
The Income-Tax Act has introduced the presumptive taxation scheme under sections 44AD, 44ADA, and 44AE to provide relief to the small and medium taxpayers from tedious task of maintaining books of account and having the accounts audited. Section 44AE of the Income Tax Act of 1961 is introduced to provide relief to small assessees engaged in the business of goods carriage. The goal is to simplify tax compliances, relieve the burden of maintaining books of accounts, and give a common income calculation technique. Assesses who choose this presumptive taxation plan are not required to keep books of accounts or have them audited.
How is
Presumptive Income Computed under Section 44AE?
The income under section 44AE will be computed on an estimated basis. Two types of goods carriage vehicles are there, and they are heavy goods vehicles and light goods trucks. Profits and gains from each shipment of products shall be computed in accordance with the following conditions on an estimate basis:
1. Heavy goods vehicles
A sum equivalent to Rs 1000 per tonne of gross vehicle weight or unladen weight for each month or part of a month in the preceding year when the assessee possessed the heavy goods vehicle.
Or
The actual amount earned by the assessee from such heavy goods truck during the fiscal year
Whichever is higher.
2. Other than heavy goods vehicles
In case of vehicles other than heavy goods vehicles, the income will be calculated at a payment of Rs 7500 for each month or part of a month in which the assessee owned the carriage of the goods.
Benefits of Using Presumptive Income Under Section 44AE Calculator
If you're looking for a big break from the paperwork that comes with calculating income tax after availing all the deductions and exemptions, then this calculator can help you greatly. All you need to do is enter your details, and this calculator will help you calculate the presumptive income under section 44AE.
Eligibility Criteria for Using Presumptive Income Under Section 44AE Calculator
The Presumptive Taxation Scheme can opt when the assessee is engaged in the business of plying, hiring, or leasing goods carriages, and also the assessee should not own more than 10 goods vehicles at any time during the previous year. As a result, there are just two key eligibility criteria:
- Adopted by the assessee who is engaged in hiring, plying, and leasing goods conveyance, and if an assessee is selling passenger automobiles or providing passenger transportation,.then such an assessee cannot adopt these provisions
- It also applies to businesses with a maximum of 10 goods vehicles. It follows that an assessee who owns more than ten. goods vehicles during the year, such assessee cannot adopt these provisions.
Example on Presumptive Income Computed under Section 44AE
Let's illustrate the concept of presumptive income computed under Section 44AE of the Income Tax Act with a hypothetical scenario:
Scenario:
Mr. Raj is a small business owner who operates a transport service. He owns a fleet of three trucks used for the transportation of goods. Mr. Raj wants to determine his taxable income for the financial year 2023-2024 using the presumptive income scheme provided under Section 44AE.
Key Information:
- Mr. Raj owns three trucks used for the transport of goods.
- Each of his trucks has a gross vehicle weight (GVW) of 10,000 kilograms.
Computation of Presumptive Income:
Under Section 44AE, the presumptive income scheme for owners of goods carriages is based on the number of trucks owned and the gross vehicle weight (GVW) of those trucks. The scheme assumes a minimum income per truck per month, regardless of the actual income earned.
As of the financial year 2023-2024, the presumptive income per month per truck is Rs. 7,500.
Step 1: Determine the Presumptive Income per Month per Truck
Presumptive Income per Month per Truck = Rs. 7,500 (as per Section 44AE)
Step 2: Calculate Total Presumptive Income
Since Mr. Raj owns three trucks, his total presumptive income for the financial year would be calculated as follows:
Total Presumptive Income = (Presumptive Income per Month per Truck) x (Number of Trucks) x (Number of Months in the Financial Year)
Total Presumptive Income = Rs. 7,500 x 3 x 12 (assuming a 12-month financial year)
Total Presumptive Income = Rs. 2,70,000
Step 3: Tax Calculation
Mr. Raj's taxable income for the financial year 2023-2024, as per Section 44AE, is Rs. 2,70,000. He will need to pay tax on this amount, and he won't be required to maintain detailed books of accounts or get his accounts audited under Section 44AB if his income is calculated under Section 44AE.
