In previous article i have discussed about the Concept of Presumptive taxation, its applicability and pre-requisites. Have also detailed the provisions of Section 44AD, In this article, i have detailed the provisions of Section 44ADA and Section 44AE.
- Section 44ADA: Presumptive Scheme for Profession
- Must be a resident in India.
- Resident individuals and partnership firms (excluding LLPs) carrying on notified professions and whose gross receipts during the previous year does not exceed the following limits can opt for 44ADA
- Legal professionals, medical practioners, Engineers and architects, Information Technology professionals
- Accountants(CAs), Company secretaries, Technical consultants, interior decorators.
- Film artists and Authorized representatives (though not notified under 44AA(1), they are included for record-keeping under Rule 6F)
- The threshold limit of turnover is ₹ 75 lakhs, If aggregate of cash receipts is less than or equal to 5% of gross receipts.
- The threshold limit is ₹50 lakhs , If aggregate of cash receipts exceed 5% of total turnover or gross receipts. *Threshold limit in this context refers to maximum turnover beyond which the assessee will cease to qualify as eligible for 44ADA
- any deduction allowable under the provisions of sections 30 to 38 of Income tax Act (including depreciation) shall be deemed to have been already given full effect to and no further deduction under those sections shall be allowed for the purpose of arriving at the taxable income.
- In case of assessee being a Partnership firm, Remuneration and interest to partners ARE NOT ALLOWED as separate deductions under Section 40(b). This is because partner remuneration and interest are deemed to have been already allowed / factored under the presumptive taxable income.
- The eligible Assessee under this section , cannot claim deduction under any of the sections 10A, 10AA, 10B, 10BA (OR) deduction under any provisions of ‘Part C’ of Chapter VIA in the relevant assessment year.
Note: Part A and Part B deductions are still allowed under Sec 44ADA. The restriction applies only to Part C -which encompasses deductions in respect of certain incomes. - The written down value of assets shall be deemed to have been calculated as if assessee had claimed and had been actually allowed depreciation for each of the relevant assessment years.
- Also, If assessee declares lower income than the presumptive rate and total income exceeds the exemption limit, then, they must maintain books of account under Section 44AA and get audited under Section 44AB.
- Section 44AE:Presumptive Scheme for Goods carriage business
- Is engaged in the business of plying, hiring, or leasing goods carriages and
- Owns no more than 10 goods vehicles at any time during the financial year
- As far as Sec 44AE is concerned, it applies to both resident and non-resident.
- Unlike Sections 44AD and 44ADA, which are restricted to individuals, HUFs, and partnership firms (excluding LLPs), Sec 44AE applies to Companies as well (whether private or public ltd)
- Per month or part thereof:- The given presumptive income is per month. Even if the assessee owns the vehicle for just one day in a month, it counts as a full month for tax purposes.
- For per ton of gross vehicle weight (GVW):- Gross Vehicle Weight refers to the total weight of a vehicle when fully loaded. The given presumptive income is for per ton of weight carried for each vehicle
- For each vehicle owned :- above two calculations are to be made for each vehicle owned for all 12 months of the financial year. An assessee, who is in possession of a goods carriage, whether taken on hire purchase or on instalments and for which the whole or part of the amount payable is still due, shall be deemed to be the owner of such goods carriage.
- Any deduction allowable under the provisions of sections 30 to 38 of Income tax Act (including depreciation) shall be deemed to have been already given full effect to and no further deduction under those sections shall be allowed for the purpose of arriving at the taxable income.
- However, in case of Sec 44AE, where the assessee is a partnership firm, remuneration and interest to partners CAN BE DEDUCTED, subject to limits specified under Section 40(b).
- The eligible Assessee under this section , cannot claim deduction under any of the sections 10A, 10AA, 10B, 10BA (OR) deduction under any provisions of ‘Part C’ of Chapter VIA in the relevant assessment year.
Note: Part A and Part B deductions are still allowed under Sec 44AE. The restriction applies only to Part C -which encompasses deductions in respect of certain incomes. - The written down value of assets shall be deemed to have been calculated as if assessee had claimed and had been actually allowed depreciation for each of the relevant assessment years.
- Also, If assessee declares lower income than the presumptive rate and total income exceeds the exemption limit, then, they must maintain books of account under Section 44AA and get audited under Section 44AB
Computation of professional income on estimated basis for Assessee being a resident in India and engaged in notified professions, subject to certain conditions. Major qualifying criteria is their gross receipts.
Eligibility Criteria:
What are notified profesionals?
These are professionals specified under Section 44AA(1) notified by CBDT. Only these specified professionals are eligible to opt for Section 44ADA.
What is the threshold for gross receipts ?
Which Professions are not eligible for PTS under 44ADA?
1. Assessee running business are not eligible for PTS under 44ADA since this section applies only for professionals.
2. Even within professions, only notified professions are eligible. Other professions may instead qualify under 44AD, provided they meet the conditions specified therein.
Taxable income
IIf the assessee satisfies the eligibility criteria and OPTS for PTS under the section, then
--->50% of gross receipts shall be deemed as taxable income
The Assessee can declare a sum more than the presumptive income as taxable income, in which case he will be taxed accordingly.
Other applicable provisions
Other provisions that are applicable for an assessee who opts for PTS under 44 ADA are are:
Doubt Questions: Is the 5-Year Lock-In Applicable to Section 44ADA?
Answer: No, the 5-year continuity rule is not applicable to Section 44ADA. That lock-in provision —is clearly stated only under Section 44AD. Hence, it is inferred that Professionals can opt in or opt out year by year, without triggering a disqualification.
44AE deals with Computation of income on estimated basis in the case of taxpayers engaged in the business of plying, leasing or hiring goods carriages, who owns not more than ten goods carriages at any time during the previous year.
Eligibility Criteria:
The eligibility criteria for 44AE is not turnover, rather it is the number of vehicles owned by the assessee
Which businesses are not eligible for PTS under 44AE?
Applies only to business of plying goods carriages and not passenger vehicles.
Taxable income:
If the assessee satisfies the eligibility criteria and OPTS for PTS under the section, then the following shall be presumed as his income:
| Vehicle Type | Presumptive Income (per month) |
|---|---|
| Heavy goods vehicle (meaning, GVW > 12,000 kg) | ₹1,000 per ton of gross vehicle weight. |
| Other goods vehicles | ₹7,500 per vehicle |
The Assessee can declare a sum more than the presumptive income as taxable income, in which case he will be taxed accordingly.
For Heavy vehicles, Income is calculated at
Note: Gross Vehicle weight = Base weight of the vehicle+ Payload (For Cargo Vehicle it is: Cargo + driver) + Fuel and accessories)
Other applicable provisions:
Other provisions that are applicable for an assessee who opts for PTS under 44 AE are are: