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Sections 44AD, 44AE and 44AF
cover special provisions of computing profits on a presumptive basis. All the
schemes are optional at the discretion of the assessee.
Conditions and manner of
computation common to all three sections are given at the end after specific
provisions applying to each section.
A] Section 44AD – Business
of civil construction etc.
(Applicable till AY
2010-11, this section is amended from AY 2011-12 details of which are given
in the subsequent paragraph B)
1] Applies to:
Any person engaged in the
business of civil construction or supply of labour for civil construction
work, if his gross receipts from the above business do not exceed Rs. 40
lakhs. The term Civil construction covers repair of any building or other
structures or road and execution of any works contract, including electrical
fittings, plumbing job etc.
2] Deemed Income:
8% of the gross receipts
payable or paid to such person or any higher amount voluntarily declared by
him shall be deemed to be his income from such business.
Refer to ‘A] Conditions’
and ‘B] Computation’ below.
B] Section 44AD –
Presumptive computation of profits for taxation for business
(Applicable from AY
2011-12, the old provisions pertaining to Section 44AD will continue to
apply till March 2010)
1] Applies to:
Any eligible assessee
engaged in an eligible business. Eligible assessee is defined as an
individual, HUF, resident partnership firm, but excludes an LLP under the
LLP Act 2008 and any assessee who has claimed a deduction under sections
10A, 10AA, 10B, 10BA or heading C of chapter VIA (sections 80I-A, 80-IB,
etc.). An eligible business means any business other than the business of
plying, hiring, or leasing of goods carriage as given in section 44AE and
whose turnover/gross receipt in the previous year does not exceed Rs.
40,00,000.
2] Deemed Income:
8% of the total turnover or
gross receipts of the assessee on account of such business or any higher
amount voluntarily declared by him shall be deemed to be his income
chargeable to tax.
Refer to ‘A] Conditions’
and ‘B] Computation’ below.
Provisions of Chapter XVII
C relating to Advance Payment of taxes will not apply to the eligible
assessee in respect of eligible business only.
C] Section 44AE – Business
of plying, leasing or hiring trucks
(Applicable till AY
2010-11, this section is amended from AY 2011-12 details of which are given
in paragraph D)
1] Applies to:
Any person engaged in the
business of plying, leasing or hiring of trucks if he owns not more than 10
goods carriages at any time during the previous year including those taken
on hire purchase or on installments. This scheme does not apply to those who
operate trucks on hire without owning them (Circular 684, dt. 10-6-1994)
2] Income:
|
Type of Goods Carriage |
Estimated Income |
|
Heavy Goods
Vehicle |
Rs. 3,500 for
every month (or part of a month) during which the goods carriage is
owned by the taxpayer. |
|
Other than
Heavy goods vehicle |
Rs. 3,150 for every month (or
part of a month) during which the goods carriage is owned by the
taxpayer. |
Refer to ‘A] Conditions’
and ‘B] Computation’ below.
D] Business of plying,
leasing or hiring trucks – Section 44AE
(Applicable from AY
2011-12, the old provisions pertaining to Section 44AE will continue to
apply till March 2010)
1] Applies to:
Any person engaged in the
business of plying, leasing or hiring of trucks if he owns not more than 10
goods carriages at any time during the previous year including those taken
on hire purchase or on installments. This scheme does not apply to those who
operate trucks on hire without owning them (Circular 684, dt. 10-6-1994)
2] Deemed Income:
|
Type of
Goods Carriage |
Estimated
Income |
|
Heavy Goods
Vehicle |
Higher of Rs. 5,000 for every month (or part of a month) during
which the
goods carriage is owned by the taxpayer or an amount actually earned
from
such vehicle. |
|
Other than
Heavy goods vehicle |
Higher of Rs. 4,500 for every month (or part of a month) during
which the goods
carriage is owned by the taxpayer or an amount actually earned from
such vehicle. |
Refer to ‘A] Conditions’
and ‘B] Computation’ below.
E] Section 44AF – Business
of retail trading of goods
(Applicable till AY
2010-11, this section will become inoperative from AY 2011-12 and the retail
traders can choose to be governed by section 44AD from AY 2011-12 which
requires presumptive income at 8% of gross receipts/turnover)
1] Applies to:
Any person engaged in the
business of retail trade in any goods or merchandise shall be covered by
this provision. If his turnover from the above business do not exceed Rs. 40
lakhs,
2] Deemed Income:
5% of the total turnover of
such person or a higher sum voluntarily declared by him shall be deemed to
be his income from such business.
Refer to ‘A] Conditions’
and ‘B] Computation’ below.
Common Conditions and
Computation method:
A] Conditions:
All deductions u/ss. 30 to
38 including depreciation deemed to be allowed. No further deduction allowed
under those sections.
The written down value of
asset used in the business will be computed as if depreciation, as
applicable, was allowed.
It will be assumed that
disallowances if any u/ss. 40, 40A and 43B were considered by calculating
the income estimated in 2] above.
In the case of a firm, the
deduction in respect of salary and interest to partners u/s. 40(b) will be
allowed.
In respect of this business
the assessee is not required to maintain books of account as per the
provisions of s. 44AA.
The assessee is not
required to get the books of account audited u/s. 44AB in respect of the
above business.
If the assessee wants to
declare lower income than the deemed profits as calculated above, he will
have to maintain the books of account as per s. 44AA and get the accounts
audited as per s. 44AB irrespective of turnover if his total income exceeds
basic exemption limit.
B] Computation:
The income calculated above
shall be aggregated with income from any other business or other heads of
income under the other provisions of the Income-tax Act.
The brought forward
business losses and other losses will be deducted.
All deductions u/ss. 80C to
80GGC and 80U shall be allowed.
NOTE:
The profit and loss from
related businesses covered by sections 44B, 44BB, 44BBA, 44BBB, namely
Shipping business in case of non-residents, Business of exploration, etc. of
mineral oils, Operation of aircraft in case of non-residents, Foreign
companies engaged in the business of civil construction, etc., in certain
turnkey projects are not covered here as they have lower relevance and
usage.
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