Presumptive Taxation | An analysis

Presumptive taxation involves lump sum levies on certain small-scale business activities to whom Section 44AB is not applicable.  Thus Sections 44AD, 44AE and 44AF of the Income-tax Act, 1961, provide for estimating the income under the head “Profits and gains of business and profession” in the cases of certain assesses.

CIVIL CONSTRUCTION

The expression civil construction includes

1. The construction or repair of any building, bridge, dam or other structure or of any canal or road; 
2. The execution of any works contract. 

44 AD DETAILS IN BRIEF

Profit for the purpose of this section shall be a sum equal to 8% of the gross receipts paid or payable to the assessee.

No further deductions allowed:

Income declared under this section is deemed to have been declared after availing the deductions available from sec 30 to sec 38 including Depreciation.

But in case of partnership firm, salary and interest payable to partners shall be allowed as a deduction subject to provisions sec 40.

Presumptive Income for this section can be explained as:

Profit for the purpose of this section shall be a sum equal to 8% of the gross receipts of the assessee or, a sum higher than the aforesaid sum as declared by the assessee voluntarily in his return of income.

Applicability of Sec 44 AB:

Income lower than the presumptive income:

Where the assessee declares lower profits and gains than the profits and gains computed on presumptive basis as above, he shall be required to keep and maintain books of account and other documents as required under sub-section (2) of Section 44AA and shall also be liable to get his accounts audited and furnish a report of such audit under Section 44AB.

44 AE DETAILS IN BRIEF:

This Section applies only to assessee owning not more than ten goods carriage vehicles (at any time during the financial year).

For the purpose of this section the assessee, who, possesses the vehicles, taken on hire purchase or on installment basis and for which the whole or part of amount payable for the purchase of said vehicles is still balance would be deemed to be the owner of such vehicle and it would be taken into account while taking the number of vehicles owned.

However it is not applicable to the assessee who operates such vehicles taken on hire.

Income considered for Heavy Goods carriage and other than Heavy Goods Carriage:

For Heavy Goods Carriage:

Rs. 5,000 for every month (or part of the month) during which the goods carrier is owned by the assessee.

For other than Heavy Goods Carriage:

Rs. 4,500 for every month (or part of the month) during which the goods carrier is owned by is assessee.

In either case the taxpayer can declare his income from such goods carriage at a rate higher than that specified above voluntarily.

No further deductions allowed:

Income declared under this section is deemed to have been declared after availing the deductions available from sec 30 to sec 38 including Depreciation.

But in case of partnership firm, salary and interest payable to partners shall be allowed as a deduction subject to provisions sec 40.

Applicability of Sec 44 AB:

Income lower than the presumptive income:

Where the assessee declares lower profits and gains than the profits and gains computed on presumptive basis as above, he shall be required to keep and maintain books of account and other documents as required under sub-section (2) of Section 44AA and shall also be liable to get his accounts audited and furnish a report of such audit under Section 44AB.

Where the assessee chooses to declare income on the basis of provisions of this section, the total turnover of the said business or the income as the case may be shall not be included in the turnover of other business or the income from the said business if any carried on by the assessee, for the purpose of provision of sections 44AA and 44AB of the Act.