SECTION 44AE OF INCOME TAX ACT

Section 44AE of the Income Tax Act, 1961 is a part of the Presumptive Taxation
Scheme. This taxation scheme mandates every businessperson to maintain books
of accounts and get them audited. However, it exempts small taxpayers from
following this daunting process. If you want to opt for this scheme, it is best to
calculate your income once to ensure whether you can do without maintaining
accounting books and auditing. Let’s understand the provisions prescribed under
Section 44AE.

 Eligibility for Section 44AE:

Section 44AE applies to individuals and entities that are involved in the plying,
hiring, or leasing of goods carriages business. These entities, i.e. HUFs, individuals,
firms, or companies should only own 10 or fewer goods carriages at any given
point during the financial year. If the number of carriages exceeds 10, the entity
won’t be eligible for presumptive taxation under this section.

 Presumptive Income:
Estimated income from each goods vehicle, being a heavy goods vehicle or other
than heavy goods vehicle would be-
GOODS HEAVY GOODS VEHICLE OTHER THAN HEAVY
CARRIAGE GOODS VEHICLE
Presumptive Rs.1000 per ton of gross vehicle Rs. 7500 for every month or
weight or unladen weight, as the case part of the month.
Income may be for every month or part of the
month.
During which such vehicle is owned by the assesse for the previous
year.

HEAVY GOODS VEHICLE – SECTION 44AE:

The definition of “heavy goods vehicle” as given in explanation to section 44AE is as under:

(aa) the expression “heavy goods vehicle” means any goods carriage, the gross vehicle weight
of which exceeds 12000 kilograms.
  Exceptions Under Section 44AE:

According to Sections 30 to 38 of the Income Tax Act, assesses opting for the
Presumptive Taxation Scheme cannot avail any exemptions and deductions. The
sum of Rs. 7,500 per vehicle per month will be deemed as the total taxable
income. However, you can claim income tax exemptions and deductions provided
under Sections 80C to 80U.If you are a partnership firm, you can claim deductions
on salary and interest paid to the partners. While Section 44AE of the Income Tax
Act does not allow a depreciation deduction, you can evaluate the written-down
value of any asset used in the business assuming that depreciation u/s 32 is
allowed. People within the purview of Section 44AE do not have to conform with
Section 44AA. However, anyone following presumptive taxation must pay
advance tax.

 Other Conditions :

Entities that do not wish to follow the Presumptive Taxation Scheme because
they claim that their income is less than Rs. 7,500 per month per vehicle should
maintain books of accounts. Additionally, it is mandatory to audit these
accounting books according to Sections 44AA and 44AB.
The prescribed TDS rate shall not be deducted on the amount paid to the
transporter if he/she provides his PAN details. As per the provisions of the
Income Tax Act, individuals can claim cash expenses only up to the limit of Rs.
20,000 as a deduction. However, the threshold for transporters is Rs. 35,000
since transporters incur heavy expenses during their long journeys.