Section 44AE: Presumptive Taxation Scheme for Goods Carriage Businesses

Section 44AE of the Income Tax Act, 1961 provides a simplified presumptive taxation scheme for businesses engaged in plying, hiring, or leasing goods carriages. It allows taxpayers to declare income at a fixed rate without maintaining detailed books of accounts or undergoing a tax audit.

1. Applicability

✅ Eligible Businesses:

• Owners of goods carriages(trucks, trailers, lorries, etc.)
• Transport operators(hiring or leasing vehicles)
• Individuals, HUFs, or firms(not companies)

❌ Exclusions:

• Passenger transport(buses, taxis, etc.)
• Businesses with more than 10 vehicles(must maintain books)

2. Presumptive Income Calculation

Example:

• A truck with 12-ton capacity:
  • ₹1,000 × 12 = ₹12,000/month(or ₹7,500, whichever is higher) → ₹12,000/month
• A small pickup truck: ₹7,500/month

Threshold:

• No upper limit on turnover(unlike Section 44AD/44ADA).
• No tax audit (Section 44AB)if income declared as per Section 44AE.

3. Key Benefits

✔ No Bookkeeping Required: No need to maintain books under Section 44AA.

✔ No Tax Audit (Section 44AB): Exempt if income declared at presumptive rates.

✔ Simplified Compliance: No need to track fuel, maintenance, or driver costs.

✔ Can Still Claim Depreciation: On new vehicle purchases.

4. Conditions & Restrictions

• Must Declare Minimum Income: As per prescribed rates.
• Cannot Declare Lower Profits: If opting for 44AE, must follow fixed rates.
• If Declaring Lower Income:
  • Books & Audit Required: Must comply with Section 44AA & 44AB.
• Advance Tax: Pay 100% by 15th March(no quarterly installments).

5. Example Calculation

Case: A transport operator owns:

• 2 Heavy Trucks (15 tons each)→ ₹1,000 × 15 × 2 = ₹30,000/month
• 3 Small Pickups→ ₹7,500 × 3 = ₹22,500/month
• Total Monthly Income= ₹52,500
• Annual Taxable Income= ₹52,500 × 12 = ₹6.3 lakh

6. Opting Out of Presumptive Scheme

• Once opted, must continue for 5 years.
• If opted out: Must maintain books & undergo audit from the next year.

7. Comparison with Other Presumptive Schemes

8. Penalty for Non-Compliance

• Underreporting Income: Penalty up to 50-200% of tax evaded.
• Late Advance Tax: Interest under Section 234B/C.

Tips :

Best for:
✔ Small transport operators with 1-10 vehicles.

✔ Those wanting minimal compliance hassle.

Not suitable for:

✖ Large fleet operators (>10 vehicles).

✖ Those with high expenses (low net profit).