Persons engaged in businesses of plying, leasing or hiring of trucks are eligible to take benefits of section 44AE. To claim benefits of section 44AE you need to fulfill following conditions;
- The person must be the owner of such goods carriage. If you have taken such goods carriage on hire purchase or on installment and for which the whole or part of the amount payable is still due then you will be deemed to be the owner of such goods carriage.
- The person should not have more than 10 goods carriage during the financial year
- The vehicle must be used for goods carriage.
If the above conditions are satisfied then you can take benefit of section 44AE i.e. presumptive taxation.
How to calculated deemed income for presumptive taxation – Section 44AE
For Heavy Goods vehicle
If you own a vehicle which weight is more than 12, 000 kg then those goods carriage will be coming under heavy goods vehicle. If you own such vehicle then your income shall be estimated at Rs. 5000 per month (Rs.75000 per month per vehicle from assessment year 2015-2016) for each goods carriage during which the goods carriage is owned by the assessee.
Other than heavy goods vehicle
If you own any goods carriage which is not a heavy goods vehicle as discussed above then your income shall be estimated at Rs. 4500 per month (Rs. 7500 per month per vehicle from assessment year 2015-2016) for each such goods carriage during which the goods carriage is owned by you.
For both the cases if you own a goods carriage for a part of the month then that has to be considered as a full month.
A higher amount than the amount specified above can be declared voluntarily as your income for the assessment year relevant to the previous year.
In Budget 2014, the above said limit of Rs. 5000 and Rs. 4000 per month has been increased to Rs. 7500 per month irrespective of the weight of the vehicle. That means, from assessment year 2015-2016 onward, heavy goods and other than heavy goods limit will not be in place and all goods carriage vehicle falling under section 44AE can take presumptive income as their income for the year @ Rs.7500 per month per vehicle.
Relevant points for section 44AE
- All deductions under section 30 to 38 including depreciation shall be deemed to have been allowed. No further deductions are allowed under these sections.
- In the case of firm the normal deduction under section 40(b) shall be allowed.
- The WDV of the assets will be calculated as if it was allowed while calculating income for income tax purpose.
- Under presumptive taxation of section 44AE, you are not required to maintain books of accounts and are not required to get your accounts audited under section 44AB.
- Income tax deductions under section 80C to 80U and rebate shall be allowed.
- If you wants to claim lower income than the income specified under section 44AE then you have to compulsorily maintain books of accounts under section 44AA and have to carry on income tax audit under section 44AB.
- If transporter has furnished PAN card details then TDS is not required to be deducted from the amount paid.
As per the present income tax act, if any payment is made in excess of Rs. 20000 otherwise than account payee cheque or account payee bank draft then such expenditure will be disallowed while calculating tax liability i.e. such expenditure will not be allowed as a deduction from income of the year.
However with effect from october 1, 2009, this limit of Rs. 20000 has been increased to Rs. 35000 in case of payment made for plying, hiring or leasing goods carriage. Please remember that the enhanced limit of Rs. 35000 is applicable for payments made “TO” transport contractors, not for payments made “BY” transport contractors.
This means, taxpayers falling under section 44AE can receive in cash up to Rs. 35000 for a transaction and the payer’s expenses will not be disallowed under Income tax act. However, while making payment in cash as a transport operator falling under section 44AE, you will have to adhere to the limit of Rs. 20000 only and not Rs. 35000.
I am operating trucks on hire in Chennai. I use take it from the truck owners and use it for my business. Will I be eligible for income tax benefits under section 44AE?
NO, to avail the benefits under section 44AE you need to be the owner of the goods carriage. In this case you are not the owner. So you cannot take the benefits of this section. Trucks owner can take this benefit.