Section 44AE – Presumptive taxation for businesses of plying, leasing or hiring trucks

To give relief to small assesses, government has come out with a simple scheme known as presumptive taxation scheme.

Under Presumptive taxation scheme, persons engaged in business of plying, leasing or hiring of trucks are required follow the conditions as laid down in section 44AE of Income Tax Act 1961 to calculate their tax liability.

To claim benefits of section 44AE you need to fulfill following conditions;

• The person must be the owner of such goods carriage. If the owner has 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 he or she will be deemed to be the owner of such goods carriage.
•  The person should not have more than 10 goods carriage at any time during the financial year.
• The vehicle must be used for goods carriage.

If the above conditions are satisfied then the owner of the goods carriage can take benefit of section 44AE i.e. presumptive taxation scheme. 

Calculating deemed income Under Section 44AE

If you own a good carriage then your income shall be estimated at Rs. 7500 for every month or part of a month during which the goods carriage is owned by the assessee in the previous year.

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 earlier limit of Rs. 5000 and Rs. 4000 per month or part of the 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 are not in place and all goods carriage vehicle falling under section  44AE can take presumptive taxation benefit and calculate tax by taking their income for the year @ Rs.7500 per month per vehicle.

Relevant points for section 44AE

If the owner of the goods carriage has opted presumptive income scheme under section 44AE then following relevant points will also be applicable to him:

• All expenses 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 section 44AE presumptive taxation, 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.

The owner is required availing benefit of section 44AE is required to file ITR 4S every year with tax department on or before the due date.

Provisions of section 44AE are not applicable in case the assessee owns more than 10 goods carriage or where he declares lower profits and gains than the profits and gains specified in section 44AE.