Presumptive Business Income
Presumptive Income Tax Scheme
To grant relief to small taxpayers from the maintenance of books of account and getting them audited, the Income-tax Act has made the presumptive taxation scheme under sections 44AD, 44ADA and 44AE.
Suits small taxpayers like freelancers, professionals, doctors, lawyers, accountants, engineers, contractors, MSME businesses can avail this benefit.
Business Income -Presumptive Income Tax under Section 44AD
Professional Income-Presumptive Income Tax under Section 44ADA
Select Businesses- Presumptive Income Tax under Section 44AE
Business Income - Presumptive Income Tax under Section 44AD
The presumptive taxation scheme of section 44AD can be adopted by resident Individual, HUF and Partnership firm.
The scheme of section 44AD can be adopted by 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
- A person whose total turnover or gross receipts for the year exceed Rs. 2 crore
In case of a person adopting the provisions of section 44AD, income is computed on presumptive basis at the rate of 6% of the turnover if payments accepted digitally or 8% of the turnover if payments accepted in cash mode. However, a person may voluntarily disclose his business income at more than 8% or 6%, of turnover.
Any person choosing for the presumptive taxation scheme under section 44AD is also liable to pay advance tax on or before 15th March of the previous year. If he fails to pay the advance, he shall be liable to pay interest as per section 234C.
Professional Income - Presumptive Income Tax under Section 44ADA
The presumptive taxation scheme of section 44ADA is designed to give relief to small taxpayers (having receipts less than Rs. 50 lakh during financial year) engaged in below specified professions.
A person resident in India engaged in following professions can take advantage of presumptive taxation scheme of section 44ADA :
- Legal
- Medical
- Engineering or architectural
- Accountancy
- Technical consultancy
- Interior decoration
- Any other profession as notified by CBDT
In case of a person adopting the provisions of section 44ADA, income will be computed on presumptive basis, i.e. at the rate of 50% of the total gross receipts of the profession. However such person can declare income higher than 50%.
Any person choosing for the presumptive taxation scheme under section 44AD is also liable to pay advance tax on or before 15th March of the previous year. If he fails to pay the advance, he shall be liable to pay interest as per section 234C.
Select Businesses - Presumptive Income Tax under 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.
n case of a person who is willing to choose 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.