Understanding the Special Provisions of Presumptive Taxation Scheme

Book Details

Chapter 1. Introduction	�
Historical Background	1
Objectives of presumptive taxation	2
What is Presumptive Taxation	3
Some examples of the kind of taxpayers to whom the scheme of Presumptive Taxation applies	3
Non-Applicability of Scheme of Presumptive Taxation	4
Section dealing with presumptive taxation schemes	4
Chapter 2. Indian Experience of Presumptive and Estimated Taxation	�
Overview of Presumptive and Estimated Taxation	6
Recommendations of Tax Reforms Committee	7
Elements of Presumption or Estimation in the Indian Income Tax Act	8
Chapter 3. Presumptive Income Taxation under the Indian Income Tax Act	�
Provisions Relating to non-residents and Foreign Companies	10
Provisions Relating to Indian Residents	11
Chapter 4. Special Provision for Computing Profits and Gains from the Business of Trading in Certain Goods [Section 44AC]	�
Memorandum Explaining the Provisions in Finance Bill 1988	14
Chapter 5. Presumptive Computation of Profits for Taxation for Business [Section 44AD]	�
Special Provision for Computing Profits and Gains of Business on Presumptive Basis	20
Eligible assessee to take advantage of the presumptive taxation scheme of section 44AD [Explanation (a) of Section 44AD(1)]	25
Eligible business [Explanation (b) of Section 44AD(1)]	25
Total Turnover or Gross Receipts	26
Suggested Records can be Maintained to Calculate Total Turnover or Gross Receipts	26
Computation of Taxable Income Presumptive Taxation Scheme of Section 44AD	27
Meaning of Total Turnover or Gross Receipts	28
Advance and Retention Money:	30
Chapter 6. Special Provision for Computing Profits and Gains of Profession on Presumptive Basis [Section 44ADA]	�
Introduction of Presumptive taxation scheme for persons having income from profession	83
Which professional assessees are eligible to opt for the section 44ADA?	85
Meaning of “Profession�	85
What compliances are required if assessee opts for section 44ADA?	86
A eligible person whose total gross receipts for the year exceed Rs. 50,00,000 cannot adopt the presumptive taxation scheme of section 44ADA	86
If the amount of cash received during the previous year does not exceed 5% of the total gross receipt, then the threshold limit for total gross receipt shall be taken as Rs. 75,00,000 instead of Rs. 50,00,000 [First Proviso to Section 44ADA(1)]	86
Eligible person who can take advantage of the presumptive taxation scheme of section 44ADA [Section 44ADA(1)]	87
Not to claim any deductions under sections 30 to 38 of the Income Tax Act [Section 44ADA(2)]	89
Provisions to be applied if a person does not opt for the presumptive taxation scheme of section 44ADA and declares his income from profession at lower rate (i.e. less than 50%) [Section 44ADA(4)]	89
Who is required to maintain books of accounts as per Section 44AA?	89
Who is required to get books of accounts audited ?	90
Applicability of tax audit under section 44AB to persons carrying on professions	90
Assessee can opt in and opt out of Section 44ADA	91
Frequently Asked Questions (FAQ)	91
Chapter 7. Special Provision for Computing Profits and Gains of Business of Plying, Hiring or Leasing Goods Carriages [Section 44AE]	�
Eligible Assessee	102
Eligible Business	103
Section 44AE operates on the basis of “ownership� and not on the basis of “usage�.	103
Applicability [With effect from Assessment year 2019-20 and subsequent years]	104
Applicability [From Assessment year 2015-16 to 2018-19]	104
Applicability [From Assessment year 2011-12 to 2014-15]	104
Applicability [From Assessment year 2003-04 to 2010-11]	105
Applicability [From Assessment year 1998-99 to 2002-03]	105
Applicability [From Assessment year 1994-95 to 1997-98]	105
Chapter 8. Special Provisions for Computing Profits and Gains of Retail Business [Section 44AF]	�
Introduction of special provision for computing profits and gains of retail trades	134
To whom applicable	136
‘Retail trade’ meaning of	136
Chapter 9. Special Provision for Computing Profits and Gains of Shipping Business in the case of Non-Residents [Section 44B]	�
Applicable to	143
Deemed Income	143
Chapter 10. Business of Providing Services and Facilities in connection with Exploration etc. of Mineral Oils [Section 44BB]	�
Purpose of Section 44BB	154
Section 44BB applicable to Non Resident	155
Non-Applicability of Section 44BB [Proviso to Section 44BB(1)]	155
Deemed Income = 10% [Section 44BB(2)]	156
Assessee may claim lower profits, but he has to maintain such books of accounts and get them audited by a CA and his case shall be decided under section 143(3) of the Act [Section 44BB(3)]	156
No set off of unabsorbed depreciation and brought forward loss shall be allowed if Income declared under presumptive schemes under section 44BB [Section 44BB(4)]	156
When assessee is required to get books of accounts audited?	157
Chapter 11. Special Provision for Computing Profits and Gains of the Business of Operation of Aircraft in the case of Non-Residents [Section 44BBA]	�
Simplification in the computation of income in respect of foreign airlines	176
Applicable to Aircraft business of Non Resident	177
Income Taxable under section 44BBA	177
Businesses covered by section 44BBA exempt from tax audit	179
Chapter 12. Special Provision for Computing Profits and Gains of Foreign Companies engaged in the Business of Civil Construction, etc., in Certain Turnkey Power Projects [Section 44BBB]	�
Turnkey Contract/Project	183
Foreign company engaged in the business of civil construction [Section 44BBB(1)]	183
Option to claim profit lower than the deemed profits under Section 44BBB [Section 44BBB(2)]	184
No set off of unabsorbed depreciation and brought forward loss shall be allowed if Income declared under presumptive scheme under section 44BBB [Section 44BBB(3)]	184
Nature of Business	184
Eligible Assessee	184
Presumptive income	185
Chapter 13. Deduction of Head Office Expenditure in the case of Non-Residents [Section 44C]	�
Restriction on Deduction of Head Office Expenses (Section 44C)	193
Purpose of section 44C	194
Applicability of Section 44C	194
Ceiling limit in respect of head office expenses in the case of non-residents [Section 44C]	194
Meaning of Adjusted Total Income [Explanation (i) to Section 44C]	195
Meaning of Head Office Expenditure [Explanation (iv) to Section 44C]	197
Quantum of Head Officer expenses allowable	197
Chapter 14. Special Provisions for Computing Income by way of Royalties, etc., in the Case of Foreign Companies [Section 44D]	�
Summary of Taxability Rules	210
Chapter 15. Special Provisions Relating to Retail Trade, etc. [Chapter XII-C : Sections 115K to 115N]	�
Filing of return - Not required	229
Deemed Income	230
Deductions under Sections 80C to 80U, 88 and 88B not to be allowed	230
Tax Calculation	230
Text of Chapter XII-C : Section 115K to 115N	231
[Special provisions relating to retail trade, etc	231
115L. Return of income not to be filed in certain cases. –	232
115M. Special provision for disallowance of deductions and rebate of income-tax. -	232
115N. Bar of proceedings in certain cases. –	233
Form of statement to be furnished under section115K	233
Chapter 16. Presumptive Taxation Scheme & Requirement of Maintaining Books of Accounts as per Section 44AA	�
Who is required to maintain books of accounts as per Section 44AA?	234
Chapter 17. Presumptive Taxation Scheme & Applicability of Tax Audit under Section 44AB	�
What is a Tax Audit?	237
Form in which the tax audit report has to be obtained	237
Requirements of getting books of accounts audited	238
Calculation of Gross receipt or Sales turnover for a tax audit	239
Chapter 18. Frequently Asked Questions (FAQ)	246
Chapter 19. Important CBDT Circulars/ Instructions/Press Release	�
Tax audit threshold of Rs 2 crores only applicable to taxpayers opting for presumptive tax scheme [CBDT’s Press Release, Dated 20.06.2016]	249
CBDT Instruction No - 2/2008, Dated: 22.02.2008 [F.No.153/7/2007- TPL(Pt.1)] ‘Benign Assessment Procedure’ for assessees engaged in diamond manufacturing and/or trading	249

About the Author

Ram Dutt Sharma

Ram Dutt Sharma was born on 27th June, 1958 in Narnaul, Haryana. He got his post-graduation from M.D. University, Rohtak in 1980. He joined the Income-tax Department in the year 1983 and retired as Income Tax Officer on 30.06.2018. He worked at various stations of North-West Region of Income-tax Department. He has wide experience of all wings of Income-tax Department such as Assessment Unit, Special Range, TDS Wing, Investigation Wing, etc. He has been Contributing articles and addressing on topics relating to Income Tax at NADT Regional Campus, Chandigarh & Bhopal. He has also addressed number of seminars organized by the Income-tax Department, Chartered Accountants, Advocates and various Trade Associations.

He is recipient of first-ever Finance Minister's Award 2017, the Income Tax Departments highest honour for sustained devotion, commitment to duty & promoting excellence in the field of Direct Taxation at National Level. The Hon'ble Union Finance Minister, Shri ArunJaitley conferred this Finance Ministers Award for Excellence for his meritorious services at VigyanBhawan, New Delhi on 24.07.2017.

Awarded by Hon'ble Member (Revenue& TPS), CBT, Special Secretary to the Government of India Certificate of Appreciation for his contribution recognized and included in the chapter Miscellaneous Orders in Let Us Share A compilation of Best Practices & Orders Vol. VIII released on 31stOctober, 2016.

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