December 14, 2018

Sec 44AE of Income Tax Act,1961

Income on Estimated Basis in case of taxpayer engaged in business of plying, leasing or hiring trucks

  • Section 44AE designed to give relief to small taxpayers
  • engaged in the business of plying, hiring or leasing of goods carriages.

 

Eligible taxpayer and eligible business for the purpose of the presumptive taxation scheme of section 44AE

  • The provisions of section 44AE are applicable to every person.
  • This scheme adopted by a person who engaged in the business of plying, hiring or leasing of goods carriages and who does not own more than 10 goods carriage vehicles at any time during the year.
  • An assessee who is in possession of a good carriage, whether taken on hire purchase or on instalments and for which the whole or part of the amount payable is still due, deemed to be the owner of such goods carriage
  • Person means any person (i.e., an individual, HUF, firm, company, etc.).

Goods carriage means any motor vehicle constructed or adapted for use solely for the carriage of goods or any motor vehicle not so constructed or adapted when used for the carriage of goods.

A person who owns more than 10 goods vehicles cannot adopt the presumptive taxation scheme of section 44AE

The important criterion of the scheme is the restriction on owning of not more than 10 goods vehicles at any time during the year.

Thus, if a person owns more than 10 goods vehicles at any time during the year, then he cannot take advantage of this scheme.

Amount of income under the head PGBP:

Income under the head PGBP is Rs. 7,500 per month or part of the month during which the goods vehicle owned by the taxpayer during the year.

⇒ Part of the month considered as full month.

⇒If the actual income is higher than the presumptive rate, i.e., Rs. 7,500, such higher income declared as his income.

If he is applying for presumptive scheme then

  • not allowed to claim deduction under section 30 to 38
  •  separate deduction on account of depreciation is not available.
  • The written down value of any asset used in such business be calculated as if depreciation as per section 32 is already claimed.
  • However, in case of a taxpayer, being a partnership firm, opting for the presumptive taxation scheme, from the income computed at the rate of Rs. 7,500 per goods vehicle per month, further deduction can be claimed on account of remuneration and interest paid to partners (computed as per the Income-tax Act).
  • not required to maintain books of accounts related to such business U/S 44AA

Applicability of the provisions relating to payment of advance tax

  • There is no concession as regards payment of advance tax in case of a person who adopts the presumptive taxation scheme of section 44AE and,
  • he will be liable to pay advance tax even if he adopts the presumptive taxation scheme of section 44AE.

If person does not opt for the presumptive taxation scheme and declares income at a lower rate i.e.at less than Rs. 7,500 

A person can declare his income at lower rate (i.e., at less than Rs. 7,500 per goods vehicle per month).

However, if he does not opts for presumptive scheme, then he has to

  • maintain the books of account as per the provisions of section 44AA and
  • get accounts audited under section 44AB.

Illustration

Mr. Khush engaged in the business of plying, hiring or leasing of goods carriage. Throughout the year 2016-17 he owned 9 goods vehicles. What will be the taxable income from the business of plying, hiring or leasing of goods carriages if he adopts the provisions of section 44AE?

Solution:

As per the provisions of section 44AE,

Income computed @ Rs. 7,500 per month or part thereof during which the goods vehicle owned by the taxpayer. The rate of Rs. 7,500 per month is same for every goods vehicle.

In the present case, Mr. Khush owned 9 goods vehicles throughout the year:

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