The IT-Department of India has maintained a special provision for people who are engaged in hiring, plying or leasing goods carriages. Any individual, business or organization who is engaged in renting out goods carriages would be deemed to have an income of INR 7500 per month per vehicle.
The section which specifically deals with this condition is Section 44AE. This is a relaxation given by IT-Department to the transporters. In section 44AE presumptive income is calculated, tax is paid on this income i.e. actual income is ignored for the transporters opting for this scheme.
Earlier there was differentiation in heavy goods carriage and Non-heavy goods carriage for the calculation of deemed income, this has been removed from FY 2014-15 onwards. The person opting for this scheme does not need to maintain books of accounts. Now let’s take a look into the implementation and coverage of Section 44AE.
Implementation of Section 44AE
The section was announced in Budget 2014 as prior to this period there were separate provisions guiding income from goods carriage. Since the introduction of this section by Mr. Arun Jaitley in 2014, tax payers can now compute their income from hiring, plying or leasing goods carriages at a flat rate of INR 7500 on per month and per carriage basis.
For example, Mr. Shyam Sundar owns 5 carriages which he lets out for hire in FY 2016-17.
His deemed income for the FY 2016-17 would be
|Income per month for each carriage||7,500|
|No of goods vehicle||5|
|Monthly income from all vehicles||37,500|
|No. of months||12|
Scope of Section 44AE: Tax on Income @ 7500 per Vehicle for Transporters
- The taxpayer should have 10 or less carriages to his name. Individuals, businesses or organizations who have more than 10 carriages to their name will not be considered under this section.
- Irrespective of whether a vehicle is owned for a full month or not, the deemed income from hiring, plying or leasing goods carriage would be INR 7,500 per month.
- ITR (Income Tax Return) can be filed by any entity- Individual, LLP, Partnership, HUF
- The applicable form to file returns is ITR-4S
- There is no scope for claiming deduction in respect of depreciation and other expenses of similar nature from deemed income. The only available deductions are for Interest on Capital paid to partners and Salary (Only in case of partnership firm).
- For the purpose of calculation of WDV of the asset, depreciation as per section 32 should be calculated and reduced from the value of asset. This is only for the purpose of calculation of WDV of asset. No depreciation is allowed as expense from the income as calculated under section 44AE.
- While applying the provision of Section 44AE, the provisions of Section 44AA and Section 44AB are not applicable to the taxpayer.
- The section is only applicable to people who have given their vehicles on lease. On the other hand, people who have taken vehicles on lease cannot avail benefits of this section.
- The taxpayer is always free to show his income higher than the deemed income for filing his ITR. However, he cannot show his income lower than the deemed income unless he has complied with the provision of Section 44AA and Section 44AB.
- No TDS shall be deducted, if the taxpayer is furnishing his PAN Card details to the person to whom he is providing services.
- As per proviso to section 40A(3A) of the income tax act, 1961 if taxpayer incurs any expenditure in respect to which payments in excess of Rs. 20,000 is made otherwise than by account payee cheque or bank draft shall be disallowed as deduction. But in case of transporters engaged in plying, hiring or leasing of goods carriage this limit of payment otherwise than by an account payee cheque or bank draft is Rs. 35,000.
Thus, we find that the IT Department of India has relatively simplified the provisions of taxation for transporters. The provision not only makes the tax computation process easy for the taxpayers, but also makes it clear and defined. Section 44AE: Tax on Income @ 7500 per Vehicle for Transporters is perhaps going to make things very easy for small transport businesses.
If you have any doubts or questions in respect of Section 44AE, do feel free to ask them in the comment section. We would try to get back to you at the earliest!
About the Author
Arpit Goyal is pursuing CA and B.com & also working as an article assistant in Gurgaon. He has an immense interest in Taxation. He loves to use technology to spread knowledge about taxation & accounts.