Presumptive Assessment Under Income Tax Act- An Analysis

Section 44AD

Section 44ADA

Section 44AE

Eligibility

1) Resident Individual

2) Resident Hindu Undivided Family

3)Resident Partnership Firm (not Limited Liability Partnership Firm)

The scheme cannot be adopted by a non-resident and by any person other than an individual, a HUF or a partnership firm (not Limited Liability Partnership Firm).

This scheme cannot be adopted by a person who has made any claim towards deductions under section 10A/10AA/10B/10BA or under sections 80HH to 80RRB in the relevant year.

a) Individual; and

b) Partnership firm (not LLP)

A person resident in India engaged in following professions can take advantage of presumptive taxation scheme of section 44ADA:-

1) Legal

2)Medical

3)Engineering or architectural

4) Accountancy

5)Technical consultancy

6) Interior decoration

7) Any other profession as notified by CBDT

The presumptive taxation scheme of section 44AE can be adopted by a person (i.e., an individual, HUF, firm, company, etc.). who is engaged in the business of plying, hiring or leasing of goods carriages (owning ≤ 10 goods carriages) during the year.

Turnover Limit

2,00,00,000

However, if the amount of cash received during the previous year does not exceed 5% of the total turnover or gross receipt of such year then the threshold limit for total turnover or gross receipt shall be taken as Rs. 3,00,00,000 instead of Rs. 2,00,00,000 w.e.f. 01.04.2024

50,00,000

However, if the amount of cash received during the previous year does not exceed 5% of the total gross receipt of such year then the threshold limit for total gross receipt shall be taken as Rs.75,00,000 instead of Rs. 50,00,000.  The receipts through the mode of cheque or a bank draft which is not an account payee, shall be considered a receipt in cash for this purpose. [Applicable w.e.f. Assessment Year 2024-25]

No turnover limit

Presumptive income

8% of the turnover or gross receipts of the eligible business for the year

50% of the total gross receipts of the profession. However, such person

can declare income higher than 50%.

Rs. 1,000 per ton of gross vehicle weight for every month or part of a month For Heavy Goods Vehicle,

In case of vehicles other than heavy goods vehicle, income will be computed at the rate of 7,500 for every month or part of a month

Payment of Advance Tax

Any person opting for the presumptive taxation scheme under section 44AD is liable to pay whole amount of advance tax on or before 15thMarch of the previous year.

If he fails to pay the advance tax by 15th March of previous year, he shall be liable to pay interest as per section 234C.

Any person opting for the presumptive taxation scheme under section 44ADA is liable to pay whole amount of advance tax on or before 15th March of the previous year.

If he fails to pay the advance tax by 15th March of previous year, he shall be liable to pay interest as per section 234C

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, hence, he will be liable to pay advance tax even if he adopts the presumptive taxation scheme of section 44AE.

Maintenance of books of account

If a person adopts the provisions of section 44AD and declares income @ 6% or 8% (as the case may be) of the turnover, then he is not required to maintain the books of account as provided for under section 44AA in respect of business covered under the presumptive taxation scheme of section 44AD.

If a person opt for the provisions of section 44ADA and declares income @50% of the gross receipts, then he is not required to maintain the books of account in respect of specified profession.

If a person adopts the provisions of section 44AE and declares his income at the rate of Rs. 7,500 per goods vehicle per month, then he is not required to maintain the books of account as provided for under section 44AA in respect of business covered under the presumptive taxation scheme of section 44AE.

Restrictions

While computing income as per the provisions of section 44AD, separate deduction on account of depreciation is not available. However, the written down value of any asset used in such business shall be calculated as if depreciation as per section 32 is claimed and has been actually allowed.

If a person opts for presumptive taxation scheme then he is also require to follow the same scheme for next 5 years. If he failed to do so, then presumptive taxation scheme will not be available for him for next 5 years.

While computing income as per the provisions of section 44ADA, separate deduction on account of depreciation is not available.

However, the written down value of any asset used in such business shall be calculated as if depreciation as per section 32 is claimed and has been actually allowed.

The income computed at the rate of Rs. 1,000/Rs. 7,500 per goods vehicle per month will be the final taxable income of the business and no further expenses will be allowed or disallowed.

However, in case of a taxpayer, being a partnership firm, opting for the presumptive taxation scheme, from the income computed at the presumptive 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)