Section 44AE of Income Tax Act - Presumptive Taxation for Transporters

Section 44AE of the Income Tax Act deals with the Presumptive Taxation Scheme for transporters. If you are a small taxpayer who is engaged in the business of transportation, you can avoid the tedious process of keeping records regularly. Instead, you can opt for a Presumptive Taxation Scheme to calculate your income at a prescribed rate.

Here's more on the Presumptive Taxation Scheme!

Budget 2025 Update

It has been proposed to insert a new section 44BBD to cater non-residents providing services or technology to a resident, operating business related to electronics manufacturing. Such non-residents will be able to calculate profits at 25% of the amount received for such services.

Which Businesses are Eligible for Presumptive Taxation Scheme under Section 44AE?

If you are engaged in businesses related to leasing, plying, or hiring goods carriages, you can opt for the Presumptive Taxation Scheme. However, you must own less than ten goods-carrying vehicles within any period during the previous FY to avail of this scheme. Thus, business people engaged in passenger transport with or have more than ten vehicles at any time within the last financial year will not be eligible for this scheme.

For instance, let’s say that Mr Anand owned eight goods vehicles during the financial year 2023-2024 and is engaged in the leasing goods carriages business. As per Section 44AE, Mr Anand would be eligible for the Presumptive Taxation Scheme.

Applicability of Section 44AE

You can compute your taxable income for any particular financial year under the presumptive taxation under section 44AE. Any small business organisation dealing with hiring, plying, or leasing goods carriage can apply for this scheme. Assessees such as partnership firms, individuals, HUFs, etc., can also apply for this scheme.

How to Calculate Presumptive Income Under Section 44AE?

If you fulfil the eligibility criteria, you can opt for Presumptive taxation under Section 44AE. Take a look at your income calculation procedure under the scheme:

• Your net taxable income will be calculated at a monthly rate of Rs 1,000 per ton per gross vehicle weight for heavy goods vehicle (the gross vehicle weight exceeds 12,000 Kgs) per month or part of the month and  Rs 7,500 for any vehicle other than heavy goods vehicle for per month or part of the month during which you owned the vehicle in the previous financial year. 
• As per Section 44AE, a part of the month when you owned the goods carriage will be considered a complete month for income calculation.
• The calculated income will represent your net taxable income, and no expenses shall be deducted.

What are the Exceptions under Section 44AE?

According to Sections 44AE of the Income-tax Act, you cannot claim any deduction allowed under sections 30 to 38,  if you have opted for Presumptive Taxation. The exemptions and deductions are available under Sections 80C to 80U. In the case of Section 44AE, the income calculation at a rate of Rs 7,500 for each vehicle per month is the Gross taxable income.

On the other hand, if you are part of a partnership firm, you can claim deductions for the interest and salary paid to the partners. It is important to note that you cannot avail deduction for depreciation under Presumptive Taxation. In this case, you can calculate the written-down price of a business asset after assuming the depreciation claim under Section 32 of the Income Tax Act.

If your business comes under Section 44AE’s limits, you no longer need to keep account books or confirm its requirements. On the other hand, if you have opted for Presumptive Taxation, you need to pay tax in advance like other taxpayers.

Other Conditions Related to Section 44AE

If you are liable to pay a lower tax than Rs 7,500 for each vehicle every month, you can refrain from following the Presumptive Taxation Scheme. However, in this case, you must maintain a book of accounts. Sections 44AA and 44AB mandate auditing these accounting books.

Besides, if you, as a transporter, provide your PAN details, you can get a TDS exemption u/s 194C(6) and thereby no TDS will be deducted on receipt of income. The Income Tax Act of 1962 states that individual taxpayers can claim up to Rs 10,000 cash expense as a deduction. However, if you are a transporter with huge expenses while completing long journeys, you can claim a deduction of up to Rs 35,000.

Final Word

The Presumptive Scheme has set a specific monthly income limit (Rs 7,500 per vehicle) for businesses under Section 44AE. You must declare the amount if your business generates a higher income than the determined limit, you must declare the amount. Similarly, generating a lower income than the prescribed rate is not allowed in presumptive taxation and you will have to maintain books of accounts and get it audited under Section 44AB. So, if your business comes under Section 44AE of the Income Tax Act, you must follow the mentioned parameters to adhere to taxation rules. 

Related Articles

1. Income Tax under section 44AB
2. Presumptive Taxation under section 44ADA