Section 44AE: Special provisions for computing profits from business of plying, hiring or leasing goods carriage

CA Santhosh Gupta Kethepalli | Last updated: 12 January 2021

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Section 44AE outlines special provisions for computing profits for owners of goods carriages who are plying, hiring, or leasing them. This scheme is for individuals owning no more than 10 goods vehicles. It allows for presumptive income calculation per vehicle, with options to declare higher income or lower profits under specific audit conditions. Importantly, it offers relaxations on maintaining books of accounts and audits, and clarifies TDS and expenditure rules.

(1) Eligible Business: Section provides for estimating business income of an owner of goods carriages from the plying, hire or leasing of such goods carriages;

(2) Eligible Assessee: Scheme applies to persons owning not more than 10 goods vehicles at any time during the previous year;

(3) Presumptive Income: Estimated income from each goods vehicle, being a heavy goods vehicle [1] or other than heavy goods vehicle would be

Goods Carriage

The assessee can also declare a higher amount in his return of income. In such case, the latter will be considered to be his income;

(4) Sec.44AE with regards to Allowances:

(i) Assessee will be deemed to have been allowed the deductions under sections 30 to 38.

(ii) Accordingly, the written down value of any asset used for the purpose of the business of the assessee will be deemed to have been calculated as if the assessee had claimed and had actually been allowed the deduction in respect of depreciation for each of the relevant assessment years.

(5) Salary and interest to partners is allowed: -Where the assesse is a firm, the salary and interest paid to its partner are allowed to be deducted subject to the conditions and limit specified under section 40(b) [which is not allowed in presumptive scheme like 44AD and 44ADA].

(6) Relaxation with regards to maintenance of Books of Accounts and get the Accounts audited:-Assessee joining the scheme will not be required to maintain books of account under section 44AA and get the accounts audited under section 44AB in respect of such income.

(7) Option to claim lower profits: -An assessee may claim lower profits and gains than the deemed profits and gains specified in sub-section (1) subject to the condition that the books of account and other documents are kept and maintained as required under section44AA (2) and the assessee gets his accounts audited and furnishes a report of such audit as required under section 44AB.

(8) ITR Form Specified:-Form ITR-4 would be applicable for income disclosed under this section.

(9) Other Provisions:-

(i) If the transporter furnishes his PAN card to the recipient of service, then NO TDS is required to be deducted on the amount paid to the transporter.

(ii) Expenditure incurred (which is otherwise deductible under the other provisions of the act for computation of income from business and profession) and payment made to a person in a day exceeds Rs. 10,000/- (Rs. 35,000/- in the case of payment for plying, hiring or leasing of goods carriage) otherwise than by an account payee cheque/draft/use of electronic clearing system through a bank account, such expenses are not allowable as deduction under Section 40A(3) in the computation of income from business and profession.

[1] Any goods carriage, the gross vehicle weight of which exceeds 12,000 kg's.

FAQ :

The scheme applies to individuals who own not more than 10 goods vehicles at any time during the previous year and are engaged in plying, hiring, or leasing these vehicles.

Presumptive income is estimated for each goods vehicle, with specific rates for heavy and other goods vehicles. The assessee can also declare a higher income, which will be considered.

Yes, assessees are deemed to have been allowed deductions under sections 30 to 38, including depreciation, as if they had claimed and been allowed them in relevant assessment years.

Assessees opting for this scheme are generally not required to maintain books of account under section 44AA or get their accounts audited under section 44AB for this income.

Yes, an assessee can claim lower profits if they maintain books of account as required under section 44AA(2) and get their accounts audited under section 44AB, furnishing an audit report.

If the transporter provides their PAN card to the service recipient, no TDS is required to be deducted on payments made to the transporter.