Income Tax on Presumptive Basis u/s 44AD, 44ADA and 44AE [ FA2018]

By | June 6, 2018
(Last Updated On: June 6, 2018)

TAX ON PRESUMPTIVE BASIS IN CASE OF CERTAIN ELIGIBLE
BUSINESSES OR PROFESSIONS UNDER INCOME TAX

[As amended by Finance Act, 2018]

To give relief to small taxpayers from the tedious job of maintenance of books of account and
from getting the accounts audited, the Income-tax Act has framed the presumptive taxation
scheme under sections 44AD of Income Tax Act, section 44ADA of Income Tax Act, and section 44AE of Income Tax Act,. In this part you can gain knowledge about various provisions of the presumptive taxation scheme of section 44AD, section 44ADA and section 44AE.

Meaning of presumptive taxation scheme

As per the Income-tax Act, a person engaged in business or profession is required to maintain
regular books of account and further, he has to get his accounts audited. To give relief to small
taxpayers from this tedious work, the Income-tax Act has framed the presumptive taxation
scheme under sections 44AD, 44ADA and 44AE.
A person adopting the presumptive taxation scheme can declare income at a prescribed rate and,
in turn, is relieved from tedious job of maintenance of books of account and also from getting the
accounts audited.

Types of presumptive taxation scheme

For small taxpayers the Income-tax Act has framed two presumptive taxation schemes as given
below:

1) The presumptive taxation scheme of section 44AD.
2) The presumptive taxation scheme of section 44ADA.
3) The presumptive taxation scheme of section 44AE.

Presumptive Taxation Scheme of Section 44AD

Eligible Person u/s 44AD

For whom the presumptive taxation scheme of section 44AD is designed?

The presumptive taxation scheme of section 44AD is designed to give relief to small taxpayers
engaged in any business (except the business of plying, hiring or leasing of goods carriages
referred to in section 44AE).
The presumptive taxation scheme of section 44AD can be adopted by following persons :

1) Resident Individual
2) Resident Hindu Undivided Family
3) Resident Partnership Firm (not Limited Liability Partnership Firm)

In other words, 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

Refer Section 44AD of Income Tax Act : Special provision for computing profits and gains of business on presumptive basis.

Businesses not covered under the presumptive taxation scheme of section 44AD

The scheme of section 44AD is designed to give relief to small taxpayers engaged in any
business, except the following businesses:
 Business of plying, hiring or leasing of goods carriages referred to in section 44AE.
 A person who is carrying on any agency business.
 A person who is earning income in the nature of commission or brokerage

Apart from above discussed businesses, a person carrying on profession as referred to in section
44AA(1)is not eligible for presumptive taxation scheme.

An insurance agent cannot adopt the presumptive taxation scheme of section 44AD

A person who is earning income in the nature of commission or brokerage cannot adopt the
presumptive taxation scheme of section 44AD. Insurance agents earn income by way of
commission and, hence, they cannot adopt the presumptive taxation scheme of section 44AD.

A person engaged in a profession as prescribed under section 44AA(1) cannot adopt the presumptive taxation scheme of section 44AD

A person who is engaged in any profession as prescribed under section 44AA(1) cannot adopt
the presumptive taxation scheme of section 44AD.

A person whose total turnover or gross receipts for the year exceed Rs. 2,00,00,000 cannot adopt the presumptive taxation scheme of section 44AD

The presumptive taxation scheme of section 44AD can be opted by the eligible persons, if the
total turnover or gross receipts from the business do not exceed Rs. 2,00,00,000. In other words,
if the total turnover or gross receipt of the business exceeds Rs. 2,00,00,000 then the scheme of
section 44AD cannot be adopted.

Manner of computation of taxable business income under the normal provisions of the Income-tax Act, i.e., in case of a person not adopting the presumptive taxation scheme of section 44AD

Generally, as per the Income-tax Act, the taxable business income of every person is computed
as follows:

Manner of computation of taxable business income under the normal provisions of the Income-tax Act, i.e., in case of a person not adopting the presumptive taxation scheme of section 44AD

For the purpose of computing taxable business income in the above manner, the taxpayers have
to maintain books of account of the business. Income will be computed on the basis of the
information revealed in the books of account.

Computation of taxable business income u/s 44AD

The manner of computation of taxable business income in case of a person adopting the presumptive taxation scheme of section 44AD

In case of a person adopting the provisions of section 44AD, income is computed on presumptive
basis at the rate of 8% of the turnover or gross receipts of the eligible business for the year.

In order to promote digital transactions and to encourage small unorganized business to accept
digital payments, section 44AD is amended with effect from the assessment year 2017-18 to
provide that income shall be computed at the rate of 6% instead of 8% if turnover/gross receipt is
received by an account payee cheque or an account payee bank draft or use of electronic clearing
system through a bank account during the previous year or before the due date of filing of return
under section 139(1).

Hence, in case of a person adopting the provisions of section 44AD, income will not be
computed in normal manner as discussed earlier (i.e., Turnover less Expenses) but will be
computed @ 6% or 8%, as the case may be, of the turnover or gross receipt.

However, a person may voluntarily disclose his business income at more than 8% or 6%, as the
case may be, of turnover or gross receipt.

Presumptive Taxation can not be applied by AO If there is Loss as per books of accounts

Business expenses not allowed u/s 44AD

The presumptive income computed as per the prescribed rate is the final income and no further expenses will be allowed or disallowed

Under the normal provisions of the Income-tax Act, taxable business income will be computed
after allowing deduction in respect of expenses which are deductible as per the Income-tax Act
and after disallowing expenses which are not deductible as per the Income-tax Act.
In case of a person who is opting for the presumptive taxation scheme of section 44AD, the
provisions of allowance/disallowances as provided for under the Income-tax Act will not apply
and income computed at the presumptive rate of 6% or 8% will be the final taxable income of the
business covered under the presumptive taxation scheme. In other words, the income computed
as per the prescribed rate will be the final taxable income of the business covered under the
presumptive taxation scheme and no further expenses will be allowed or disallowed.

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.

In presumptive taxation , AO can’t ask explanation of expenses : ITAT Chandigarh

Maintenance of Books of Accounts under Section 44AD

No need to maintain books of account as prescribed under section 44AA

Section 44AA deals with provisions relating to maintenance of books of account by a person
engaged in business/profession. Thus, a person engaged in business/profession has to maintain
books of account of his business/profession according to the provisions of section 44AA.

In case of a person engaged in a business and opting for the presumptive taxation scheme of
section 44AD, the provisions of section 44AA relating to maintenance of books of account will
not apply. In other words, 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.

Advance Tax under Section 44AD

Payment of advance tax in respect of income from business covered under section 44AD

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.

Note: Any amount paid by way of advance tax on or before 31st day of March shall also be
treated as advance tax paid during the financial year ending on that day.

if a person does not opt for Section 44AD

Provisions to be applied if a person does not opt for the presumptive taxation scheme of section 44AD and declares income at a lower rate, i.e., at less than 8%

A person can declare income at lower rate (i.e., at less than 6% or 8%), however, if he does so,
and his income exceeds the maximum amount which is not chargeable to tax, then he is required
to maintain the books of account as per the provisions of section 44AA and has to get his
accounts audited as per section 44ABTax Audit limit of Rs 2 Crore apply to presumptive taxation scheme : Press Release 20.06.2016

Consequences if a person opts out u/s 44AD

Consequences if a person opts out from the presumptive taxation scheme of section 44AD

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. [For example, an assessee claims to be taxed on presumptive
basis under Section 44AD for AY 2017-18. For AY 2018-19 and 2019-20 and he offers income
on basis of presumptive taxation scheme. However, for AY 2020-21, he did not opt for
presumptive taxation Scheme. In this case, he will not be eligible to claim benefit of
presumptive taxation scheme for next five AYs, i.e. from AY 2021-22 to 2025-26.]

Further, he is required to keep and maintain books of account and he is also liable for tax audit as
per section 44AB from the AY in which he opts out from the presumptive taxation scheme. [If
his total income exceeds maximum amount not chargeable to tax]

Presumptive Taxation Scheme of Section 44ADA

For whom the presumptive taxation scheme of section 44ADA is designed?

The presumptive taxation scheme of section 44ADA is designed to give relief to small taxpayers
engaged in specified profession. refer Section 44ADA  : Special provision for computing profits and gains of profession on presumptive basis.

Eligible persons u/s 44ADA

Eligible persons who can take advantage of the presumptive taxation scheme of section 44ADA

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

Computation of taxable income u/s 44ADA

Manner of computation of taxable income in case of a person adopting the presumptive taxation scheme of section 44ADA

In case of a person adopting the provisions of section 44ADA, income will be computed on
presumptive basis, i.e. @ 50% of the total gross receipts of the profession. However such person
can declare income higher than 50%.
In other words, in case of a person adopting the provisions of section 44ADA, income will not be
computed in normal manner but will be computed @50% of the gross receipts.

Business Expenses not Allowed u/s 44ADA

The presumptive income computed @ 50% is the final income and no further expenses will be allowed
A person who adopts the presumptive taxation scheme is deemed to have claimed all deduction
of expenses. Any further claim of deduction is not allowed after declaring profit @ 50%.
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.

Advance Tax under Section 44ADA

Payment of advance tax in respect of income from professions covered under section
44ADA
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.

Maintenance of books of account u/s 44ADA

Maintenance of books of account if a person opts for presumptive taxation scheme of
section 44ADA

In case of a person engaged in a specified profession as referred in section 44AA(1) and opts for
presumptive taxation scheme of section 44ADA, the provision of section 44AA relating to
maintenance of books of account will not apply. In other words, 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  person does not opt Section 44ADA

Provisions to be applied if a person does not opt for the presumptive taxation scheme of section 44ADA and declares his income from profession at lower rate (i.e. less than 50%)

A person can declare income at lower rate (i.e. less than 50%), however, if he does so, and his
income exceeds the maximum amount which is not chargeable to tax, then he is required to
maintain the books of account as per the provisions of section 44AA and has to get his accounts
audited as per section 44AB

Presumptive Taxation Scheme of Section 44AE

Applicability of the presumptive taxation scheme of section 44AE

The scheme of section 44AE is designed to give relief to small taxpayers engaged in the business
of plying, hiring or leasing of goods carriages. Refer  Section 44AE of Income Tax Act  : Special provision for computing profits and gains of business of plying, hiring or leasing goods carriages.

Eligible Persons u/s 44AE

Eligible taxpayer and eligible business for the purpose of the presumptive taxation scheme of section 44AE

The provisions of section 44AE are applicable to every person (i.e., an individual, HUF, firm,
company, etc.).
The presumptive taxation scheme of section 44AE can be adopted by a person who is engaged in
the business of plying, hiring or leasing of goods carriages and who does not own more than 10
goods vehicles at any time during the year.

A person who owns more than 10 goods vehicles cannot adopt the presumptive taxation scheme of section 44AE

The presumptive taxation scheme of section 44AE can be adopted by a person who is engaged in
the business of plying, hiring or leasing of goods carriages and who does not own more than 10
goods vehicles at any time during the year.
The important criterion of the scheme is the restriction on owning of not more than 10 goods
vehicles at any time during the year. Thus, if a person owns more than 10 goods vehicles at any
time during the year, then he cannot take advantage of this scheme.

Computation of Taxable business income u/s 44AE

The manner of computation of taxable business income in case of a person adopting the presumptive taxation scheme of section 44AE.

In case of a person who is willing to opt for the presumptive taxation scheme of section 44AE,
income will be computed on an estimated basis.

For Heavy Goods Vehicle, income will be computed at the rate of Rs. 1,000 per ton of gross
vehicle weight for every month or part of a month during which the heavy goods vehicle is
owned by taxpayer. 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 during which the goods carriage is owned
by taxpayer. Part of the month would be considered as full month.

Note 1 : If the actual income is higher than the presumptive rate, i.e., higher than Rs. 1,000/Rs.
7,500, then such higher income can be declared.
Note 2 : “Heavy Goods Vehicle” means any goods carriage having gross vehicle weight
exceeding 12,000 kilograms.

Illustration
Mr. Khush is engaged in the business of plying, hiring or leasing of goods carriage. Throughout
the year 2018-19 he owned 9 goods vehicles (other than heavy goods vehicles). What will be the
taxable income from the business of plying, hiring or leasing of goods carriages if he adopts the
provisions of section 44AE?

As per the provisions of section 44AE, for Heavy Goods Vehicle, income will be computed at
the rate of Rs. 1,000 per ton of gross vehicle weight for every month or part of a month during
which the heavy goods vehicle is owned by taxpayer. 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 during
which the goods carriage is owned by taxpayer.

In the present case, Mr. Khush owned 9 goods vehicles (other than heavy goods vehicles)
throughout the year and, hence, income will be computed as follows:

section 44ae income tax

Illustration
Mr. Sunil engaged in the business of plying, hiring or leasing goods carriages. He owned 5 heavy
goods vehicle having gross weight of 13,000 kilograms and 4 other goods vehicle during the
previous year 2018-19. What will be his taxable income as per the provisions of section 44AE?

**
As per the provisions of section 44AE, for Heavy Goods Vehicle, income will be computed at
the rate of Rs. 1,000 per ton of gross vehicle weight for every month or part of a month during
which the heavy goods vehicle is owned by taxpayer. 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 during
which the goods carriage is owned by taxpayer

In the present case, Mr. Sunil owned total 9 goods vehicles in which 5 are heavy goods vehicles
having gross weight of 13,000 Kilograms. Hence, income will be computed as follows:

 

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

Under the normal provisions of the Income-tax Act, taxable business income will be computed
after allowing deduction in respect of expenses which are deductible as per the Income-tax Act
and after disallowing expenses which are not deductible as per the Income-tax Act.

In case of a person who is opting for the presumptive taxation scheme of section 44AE, the
provisions of allowance/disallowances as provided for under the Income-tax Act, will not apply
and income computed at the presumptive rate of Rs. 1,000/Rs. 7,500 will be the final income. In
other words, 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).

While computing income as per the provisions of section 44AE, 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.

Maintenance of books of account u/s 44AE

No need to maintain books of account as prescribed under section 44AA

Section 44AA of the Income-tax Act, 1961 has provisions relating to maintenance of books of
account by a person engaged in business/profession. Thus, a person engaged in
business/profession has to maintain books of account of his business/profession according to the
provisions of section 44AA.

In case of a person opting for the presumptive taxation scheme of section 44AE, the provisions
of section 44AA relating to maintenance of books of account will not apply. In other words, 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.

Advance tax u/s 44AE

Applicability of the provisions relating to payment of advance tax

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.

if a person does not opt Section 44AE

Provisions to be applied if a person does not opt for the presumptive taxation scheme of section 44AE and declares income at a lower rate, i.e., at less than Rs. 1,000 per ton or Rs. 7,500 per goods vehicle per month.

A person can declare his income at lower rate (i.e., at less than Rs. 1,000 per ton or Rs. 7,500 per
goods vehicle per month). However, if he does so, then he is required to maintain the books of
account as per the provisions of section 44AA and has to get his accounts audited under section
44AB.

Judgments on Income Tax on Presumptive Basis

Presumptive Taxation can not be applied by AO If there is Loss as per books of accounts

In presumptive taxation , AO can’t ask explanation of expenses : ITAT Chandigarh

Multiple Choice Questions on Income Tax on Presumptive Basis

MCQ ON TAX ON PRESUMPTIVE BASIS IN CASE OF CERTAIN ELIGIBLE BUSINESSES

Q1. The presumptive taxation scheme of section 44AD is designed to give relief to small
taxpayers engaged in any business including the business of plying, hiring or leasing of goods
carriages.
(a) True (b) False
Correct answer : (b)
Justification of correct answer :

The presumptive taxation scheme of section 44AD is designed to give relief to small taxpayers
engaged in any business except the business of plying, hiring or leasing of goods carriages
referred to in section 44AE.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q2. The presumptive taxation scheme of section 44AD cannot be adopted by __________.
(a) Resident Individual (b) Resident HUF
(c) Resident Partnership Firm (d) Limited Liability Partnership Firm
Correct answer : (d)
Justification of correct answer :
The presumptive taxation scheme of section 44AD can be adopted by following persons:
1) Resident Individual
2) Resident Hindu Undivided Family
3) Resident Partnership Firm (not Limited Liability Partnership Firm)
Thus, option (d) is the correct option.

Q3. A person who is carrying on any agency business and a person who is earning income in the
nature of commission or brokerage cannot adopt the provisions of section 44AD.
(a) True (b) False

Correct answer : (a)
Justification of correct answer :
The scheme of section 44AD is designed to give relief to small taxpayers engaged in any
business, except the following businesses:
 Business of plying, hiring or leasing of goods carriages referred to in section 44AE.
 A person who is carrying on any agency business.

 A person who is earning income in the nature of commission or brokerage
Thus, the statement given in the question is true and hence, option (a) is the correct option.

Q4. In case of a person adopting the provisions of section 44AD, income will be computed on
presumptive basis, i.e., @ _____________ of the turnover or gross receipts of the eligible
business for the year if turnover/gross receipt is received by an account payee cheque or an
account payee bank draft or use of electronic clearing system through a bank account during the
previous year or before the due date of filing of return under section 139(1).
(a) 2% (b) 6%
(c) 8% (d) 10%

Correct Answer: (b)
Justification of correct answer:
In case of a person adopting the provisions of section 44AD, income is computed on presumptive
basis at the rate of 8% of the turnover or gross receipts of the eligible business for the year.
However, in order to promote digital transactions and to encourage small unorganized business
to accept digital payments, section 44AD is amended with effect from the assessment year 2017-
18 to provide that income shall be computed at the rate of 6% instead of 8% if turnover/gross
receipt is received by an account payee cheque or an account payee bank draft or use of
electronic clearing system through a bank account during the previous year or before the due
date of filing of return under section 139(1).
Thus, option (b) is the correct option.

Q5. While computing income as per the provisions of section 44AD, separate deduction on
account of depreciation is available.
(a) True (b) False
Correct answer : (b)
Justification of correct answer :
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.
Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q6. A person opting for the presumptive taxation scheme of section 44AD will ________ to pay
advance tax in respect of income from business covered under section 44AD.
(a) Be liable (b) Not be liable
Correct answer : (a)

Justification of correct answer :
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.
Note: Any amount paid by way of advance tax on or before 31st day of March shall also be
treated as advance tax paid during the financial year ending on that day.

Q7. The presumptive taxation scheme of section 44ADA is designed to give relief to small
taxpayers engaged in any profession.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
The presumptive taxation scheme of section 44ADA is designed to give relief to small taxpayers
engaged in specified profession (i.e., legal, medical, engineering or architectural, accountancy,
technical consultancy, interior decoration or any other profession as notified by CBDT).
Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q8. The presumptive taxation scheme of section 44ADA can be adopted by __________.
(a) Resident Individual (b) Resident HUF
(c) Resident Partnership Firm (d) Resident person
Correct answer: (d)
Justification of correct answer:
The presumptive taxation scheme of section 44ADA can be adopted by any person resident in
India

Thus, option (d) is the correct option.

Q9. In case of a person adopting the provisions of section 44ADA, income will be computed on
presumptive basis, i.e., @ _________of gross receipts of the specified profession for the year.
(a) 2% (b) 5%
(c) 50% (d) 10%

Correct answer : (c)
In case of a person adopting the provisions of section 44ADA, income will be computed on
presumptive basis, i.e. @ 50% of the total gross receipts of the profession. However such person
can declare income higher than 50%.
In other words, in case of a person adopting the provisions of section 44ADA, income will not be
computed in normal manner but will be computed @50% of the gross receipts.
Thus, option (c) is the correct option

Q10. While computing income as per the provisions of section 44ADA, separate deduction on
account of depreciation is available.
(a) True (b) False
Correct answer : (b)
Justification of correct answer :
A person who adopts the presumptive taxation scheme is deemed to have claimed all deduction
of expenses. Any further claim of deduction is not allowed after declaring profit @ 50%.
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.
Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q11. A person opting for the presumptive taxation scheme of section 44ADA will ________ to
pay advance tax in respect of income from business covered under section 44ADA.
(a) Be liable (b) Not be liable
Correct answer : (a)
Justification of correct answer :
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.
Thus, option (a) is the correct option.

Q12. The scheme of section 44AE is designed to give relief to small taxpayers engaged in the
business of__________.
(a) Plying, hiring or leasing of goods carriages (b) Provision store
(c) Medical store (d) Departmental store
Correct answer : (a)
Justification of correct answer :
The scheme of section 44AE is designed to give relief to small taxpayers engaged in the business
of plying, hiring or leasing of goods carriages.
Thus, option (a) is the correct option.

Q13. The presumptive taxation scheme of section 44AE can be adopted by a person who is
engaged in the business of plying, hiring or leasing of goods carriages and who does not own
more than ________ goods vehicles at any time during the year.
(a) 50 (b) 30
(c) 10 (d) 5
Correct answer : (c)
Justification of correct answer :
The presumptive taxation scheme of section 44AE can be adopted by a person who is engaged in
the business of plying, hiring or leasing of goods carriages and who does not own more than 10
goods vehicles at any time during the year.
Thus, option (c) is the correct option.

Q14. In case of a person who is willing to opt for the presumptive taxation scheme of section
44AE, income will be computed @ Rs. 5,000 per month during which the goods vehicle is
owned by him during the year and part of the month would be ignored.
(a) True (b) False
Correct answer : (b)
Justification of correct answer :
In case of a person who is willing to opt for the presumptive taxation scheme of section 44AE,
for Heavy Goods Vehicle, income will be computed at the rate of Rs. 1,000 per ton of gross
vehicle weight for every month or part of a month during which the heavy goods vehicle is
owned by taxpayer. 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 during which the goods carriage is owned
by taxpayer. Part of the month would be considered as full month.
Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q15. A partnership firm adopting the provisions of section 44AE can claim further deduction on
account of remuneration and interest paid to partners (computed as per the Income-tax Act) from
the income computed at the presumptive rate.
(a) True (b) False
Correct answer : (a)
Justification of correct answer :
In case of a taxpayer, being a partnership firm, opting for the presumptive taxation scheme, can
claim further deduction on account of remuneration and interest paid to partners (computed as
per the Income-tax Act) from the income computed at the presumptive rate.
Thus, the statement given in the question is true and hence, option (a) is the correct option.

Reference : https://www.incometaxindia.gov.in

Income Tax on Presumptive Basis u/s 44AD, 44ADA and 44AE

presumptive taxation for professionals, presumptive taxation for ay 2018-19, section 44ada of income tax act, how to calculate presumptive income, eligible business under section 44ad,

section 44ada of income tax act for ay 2018-19,

 

 

 

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2 thoughts on “Income Tax on Presumptive Basis u/s 44AD, 44ADA and 44AE [ FA2018]

  1. Pingback: Presumptive Taxation under Income Tax : Free Study Material - Tax Heal

  2. Pingback: Presumptive taxation u/s 44AD Income Tax: Audit Limit w.e.f AY 2017-18 - Tax Heal

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