Section 44AE: Simplified Taxation for Goods Carriage Businesses (A.Y. 2023-24)

Section 44AE of the Income Tax Act is a significant provision that facilitates the implementation and management of the Presumptive Taxation Scheme. This scheme is specifically designed for small and medium enterprises engaged in the business of plying, hiring, or leasing goods carriages. It aims to simplify the tax compliance process by providing a standard income calculation approach and relieving taxpayers from the requirement of maintaining detailed books of accounts and undergoing audit procedures.

Quick Summary of Section 44AE A.Y. 2023-24

The table provides a quick summary of important information related to Section 44AE of the Income Tax Act and the Presumptive Taxation Scheme for businesses in the goods carriage industry. It highlights key points such as the purpose and applicability of Section 44AE, the calculation of income under this provision, restrictions on expense deductions, advance tax payment requirements, and the availability of deductions under Chapter VI-A. This table serves as a convenient reference for understanding the main aspects of Section 44AE and its implications for eligible taxpayers.

Summary	Information
What is Section 44AE	Section 44AE facilitates the implementation and management of the Presumptive Taxation Scheme, providing a streamlined process for reporting and calculating income for eligible businesses in the goods carriage industry.
Eligible Business	Businesses involved in the plying, hiring, or leasing of goods carriages are eligible for the presumptive income scheme under Section 44AE. The business should not own more than ten goods carriages during the previous year.
Applicability	Section 44AE applies to individuals, HUFs, partnership firms, and companies engaged in the business of plying, hiring, or leasing goods carriages. There are no specific restrictions on any category of taxpayers who can opt for this scheme.
Calculation of Income	– Heavy Goods Vehicles (HGVs): Deemed income per month is ₹7,500 for the first month or part of the month, and ₹7,500 for every additional month or part of the month. – Non-Heavy Goods Vehicles (NHGVs): Deemed income per month is ₹1,000.
Expenses	Section 44AE does not allow deductions for expenses. All allowable deductions under Sections 30 to 38 are deemed to have been allowed. Exception: Partnership firms can claim deductions for interest or remuneration paid to partners under Section 40(b).
Advance Tax	Taxpayers opting for presumptive income under Section 44AE should pay advance tax in four installments during the financial year: – 1st Installment: On or before 15th June – 2nd Installment: On or before 15th September – 3rd Installment: On or before 15th December – 4th Installment: On or before 15th March
Deduction under Chapter VI-A	Taxpayers under Section 44AE can claim deductions under Chapter VI-A (Deduction from 80C to 80U) for eligible expenses and investments.

What is Section 44AE

Section 44AE plays a crucial role in implementing and administering the Presumptive Taxation Scheme under Section 44AE, providing a streamlined process for reporting and calculating income for eligible businesses in the goods carriage industry.

Under the Presumptive Taxation Scheme, eligible taxpayers can calculate their income based on a predetermined percentage of the gross vehicle weight or unladen weight of their goods carriages, depending on whether they are heavy goods vehicles or other types of goods vehicles.

By using Section 44AE, taxpayers can avail the benefits of the Presumptive Taxation Scheme, such as simplified tax calculations and exemption from the maintenance of detailed books of accounts and audit requirements. However, it’s important to note that opting for this scheme may limit the taxpayer’s ability to claim deductions under other sections of the Income Tax Act.

Eligible Business for Presumptive Income Scheme Under Section 44AE

Under Section 44AE of the Income Tax Act, the presumptive income scheme is applicable to businesses that are engaged in the plying, hiring, or leasing of goods carriages. To be eligible for this scheme, the business must satisfy the following conditions:

1. The assessee must be involved in the business of plying, hiring, or leasing goods carriages.
2. The assessee should not own more than ten goods carriages at any time during the previous year.

If a business meets these criteria, it can opt for the presumptive income scheme under Section 44AE and enjoy simplified taxation compliances without the requirement to maintain books of accounts or undergo a tax audit.

Example

Sure! Here’s an example to illustrate the eligibility for the presumptive income scheme under Section 44AE:

Let’s say Mr. Kumar owns a transport business where he operates a fleet of goods carriages. During the previous year, he owned six goods carriages that were used for the transportation of goods.

Since Mr. Kumar’s business involves plying goods carriages and he owns fewer than ten such carriages, he is eligible to opt for the presumptive income scheme under Section 44AE. By choosing this scheme, Mr. Kumar can calculate his taxable income at a prescribed rate per goods carriage, without the need to maintain detailed books of accounts or undergo a tax audit.

Applicability of Section 44AE A.Y. 2023-24

Section 44AE of the Income Tax Act, 1961 is applicable to individuals, Hindu Undivided Families (HUFs), partnership firms and companies who are engaged in the business of plying, hiring, or leasing goods carriages. The section provides a presumptive taxation scheme for such businesses. The presumptive income scheme is applicable to a wide range of taxpayers, including individuals, Hindu Undivided Families (HUFs), partnership firms, and registered companies. Unlike certain other schemes like Section 44AD, there are no specific restrictions on any category of taxpayers who can opt for this scheme.

Here are the key points regarding the applicability of Section 44AE:

1. Nature of Business: The section applies to businesses involved in the operation of plying, hiring, or leasing such goods carriages. It is specifically meant for businesses engaged in the transportation of goods and not passenger transportation.

2. Number of Goods Carriages: To be eligible for the presumptive income scheme under Section 44AE, the taxpayer should own and use goods carriages for the business. The number of goods carriages owned and used should not exceed ten at any time during the previous year.

3. Presumptive Income Calculation: Under this scheme, the income of the taxpayer is determined based on a prescribed amount per goods carriage. The prescribed amount for each goods carriage may vary depending on the gross vehicle weight and whether the carriage of the goods is owned or hired.

4. Maintenance of Books of Accounts: Taxpayers opting for the presumptive income scheme under Section 44AE are not required to maintain detailed books of accounts for the business. However, they should maintain certain documents such as vehicle-related expenses, details of goods carriage, and other relevant records.

5. Tax Audit: Taxpayers availing the benefits of Section 44AE are exempt from undergoing a tax audit for business income. However, if the taxpayer has any other income that requires a tax audit, such audit will still be applicable.

Calculation of Income Under Section 44AE

The scheme provides for a deemed income calculation based on the number of vehicles owned or hired by the taxpayer.

Here are the details for the calculation of income under Section 44AE:

1. Heavy Goods Vehicles (HGVs):
According to the provision, any goods carriage having a gross vehicle weight (GVW) exceeding 12,000 kilograms is considered a heavy goods vehicle (HGV).

The deemed income per month for each HGV is calculated as follows:
– For the first month or part of the month: ₹7,500
– For every additional month or part of the month: ₹7,500

2. Non-Heavy Goods Vehicles (NHGVs):
Non-heavy goods vehicles (NHGVs) include all goods carriages that do not fall under the category of heavy goods vehicles (HGVs), i.e., having a GVW of 12,000 kilograms or less.

The deemed income per month for each NHGV is calculated as follows:
– For every month or part of the month: ₹1,000

Type of Vehicle	Presumptive Income
Heavy goods carriage vehicle	Rs. 1,000 per ton of gross vehicle weight or unladen weight for every month or part of the month
Other goods carriage vehicle	Rs. 7,500 per month or part of the month

It’s important to note that the deemed income calculation under Section 44AE is based on the number of vehicles owned or hired during the financial year. The income calculated using these rates is considered as the presumptive income, and no further deductions or expenses are allowed to be claimed under this scheme except depreciation.

No Further Expenses Allowed Under Section 44AE

No, expenses are not allowed to be deducted under Section 44AE. All the deductions allowable under Sections 30 to 38 (revenue expenditure or capital expenditure) are deemed to have been allowed, and no further deduction is permitted under these sections. This means that the presumptive income under Section 44AE is calculated based on a specified percentage of the gross receipts, and no additional deductions for expenses are permitted.

Partnership Remuneration: However, if the assessee is a partnership firm, it can still claim a deduction in respect of interest or remuneration paid to the partners in accordance with Section 40(b). This is an exception to the general rule of no further deductions.

Depreciation: Under the presumptive income scheme of Section 44AE, depreciation on capital assets is deemed to have been allowed. This means that the written down value (WDV) of capital assets is deemed to have been calculated as if the eligible assessee had claimed and allowed the depreciation for each relevant assessment year.

Therefore, while calculating the presumptive income under Section 44AE, no separate deduction for depreciation is allowed because it is already considered to have been factored into the computation of the deemed income.

Payment of Advance Tax Under Section 44AE

Under Section 44AE of the Income Tax Act, taxpayers who opt for the presumptive income scheme are also required to pay advance tax. However, there is a difference in the manner of advance tax payment compared to taxpayers opting for presumptive taxation under Section 44AD and 44ADA.

Taxpayers under Section 44AE are not provided with the option to pay advance tax in a single installment on or before March 15. Instead, they are required to pay their advance tax in four installments during the financial year.

The due dates for payment of advance tax are as follows:
1st Installment: On or before 15th June
2nd Installment: On or before 15th September
3rd Installment: On or before 15th December
4th Installment: On or before 15th March

Taxpayers should ensure timely payment of advance tax according to the prescribed due dates to avoid any interest or penalty charges.

Deduction under Chapter VI-A

Under Section 44AE of the Income Tax Act, taxpayers who opt for the presumptive income scheme can still claim deductions under Chapter VI-A (Deduction from 80C to 80U). Chapter VI-A of the Income Tax Act provides various deductions for eligible expenses and investments.

FAQs – Section 44AE and Presumptive Taxation Scheme

Q1: What is the purpose of Section 44AE?
A1: Section 44AE facilitates the implementation and management of the Presumptive Taxation Scheme, providing a streamlined process for reporting and calculating income for eligible businesses in the goods carriage industry.

Q2: Which businesses are eligible for the presumptive income scheme under Section 44AE?
A2: Businesses involved in the plying, hiring, or leasing of goods carriages are eligible for the presumptive income scheme under Section 44AE. The business should not own more than ten goods carriages during the previous year.

Q3: Who can opt for the presumptive income scheme under Section 44AE?
A3: Individuals, HUFs, partnership firms, and companies engaged in the business of plying, hiring, or leasing goods carriages can opt for the presumptive income scheme under Section 44AE. There are no specific restrictions on any category of taxpayers who can avail this scheme.

Q4: How is income calculated under Section 44AE?
A4: The income calculation depends on the type of goods vehicle. For heavy goods vehicles (HGVs), the deemed income per month is ₹7,500 for the first month or part of the month, and ₹7,500 for every additional month or part of the month. For non-heavy goods vehicles (NHGVs), the deemed income per month is ₹1,000.

Q5: Are expense deductions allowed under Section 44AE?
A5: No, expense deductions are not allowed under Section 44AE. All allowable deductions under Sections 30 to 38 are deemed to have been allowed, except for partnership firms which can claim deductions for interest or remuneration paid to partners under Section 40(b).

Q6: How is advance tax payment handled for taxpayers under Section 44AE?
A6: Taxpayers under Section 44AE should pay advance tax in four installments during the financial year. The due dates are as follows: 1st Installment – On or before 15th June, 2nd Installment – On or before 15th September, 3rd Installment – On or before 15th December, and 4th Installment – On or before 15th March.

Q7: Can taxpayers claim deductions under Chapter VI-A under Section 44AE?
A7: Yes, taxpayers under Section 44AE can claim deductions under Chapter VI-A (Deduction from 80C to 80U) for eligible expenses and investments.