Presumptive earning under income Tax Act, 1961

Presumptive earning  under income Tax Act, 1961

Presumptive earnings is the idea introduced with the aid of the earnings Tax department beneath the Presumptive Taxation Scheme with a view to permit the assessee to disclose his profits on presumptive foundation under the relevant sections and their provisions thereof. allow us to understand them in detail.

which means of Presumptive Taxation Scheme:

As according to the profits-tax Act, someone engaged in commercial enterprise is needed to preserve normal books of account and similarly, he has to get his money owed audited. to offer comfort to small taxpayers from this tedious paintings, the profits-tax Act has framed the presumptive taxation scheme under sections 44AD and 44AE and standard besides those sections, the subsequent sections are also notified through the income tax department underneath presumptive taxation scheme:
Section 44 AF
Section 44B
Section 44BB
Section 44BBA
Section 44BBB

a person adopting the presumptive taxation scheme can claim profits at a prescribed rate and, in turn, is relieved from tedious process of renovation of books of account and also from getting the debts audited.

For small taxpayers the income-tax Act has framed presumptive taxation schemes as given under:

1) The presumptive taxation scheme of phase 44AD.

2) The presumptive taxation scheme of phase 44AE.

Now, for understand the identical in detail, allow us to first examine the following sections:

Presumptive Taxation Scheme under segment 44AD:

inside the case of an eligible assessee engaged in an eligible business, a sum same to eight consistent with cent of the entire turnover or gross receipts of the assessee in the previous yr resulting from such commercial enterprise or, because the case may be, a sum better than the aforesaid sum claimed to have been earned by using the eligible assessee, will be deemed to be the income and profits of such commercial enterprise chargeable to tax under the top “profits and gains of business or career”.

In quick, As in line with this segment, an eligible assessee who is engaged in eligible commercial enterprise will pay tax on minimum 8% of his general turnover with out preserving regular books of money owed.

For the cause of this section,

Eligible Assessee method:

An character.
Hindu undivided own family.
A partnership firm, however not a confined legal responsibility partnership firm, who’s a resident.
Eligible business manner:

Any business except the commercial enterprise of plying, hiring or leasing items carriages noted in segment 44AE.
whose overall turnover or gross receipts inside the preceding yr does now not exceed an quantity of 1 crore rupees.
people who can’t adopt this scheme beneath 44AD:

a person who is incomes profits within the nature of commission or brokerage can not undertake the presumptive taxation scheme of segment 44AD.
a person who is engaged in any profession as prescribed under phase 44AA(1) cannot undertake the presumptive taxation scheme of segment 44AD.
The presumptive taxation scheme of phase 44AD may be opted via the eligible people, if the overall turnover or gross receipts from the commercial enterprise do not exceed the restrict of audit prescribed underneath phase 44AB (i.e., Rs. 1,00,00,000). In other words, if the entire turnover or gross receipt of the enterprise exceeds Rs. 1,00,00,000 then the scheme of section 44AD cannot be followed.
Finance Act 2016, Notified phase 44ADA that’s as follows and will be relevant from 01.04.2017:

in the case of an assessee, being a resident in India, who’s engaged in a career stated in sub-section (1) of phase 44AA and whose total gross receipts do no longer exceed fifty lakh rupees in a preceding year, a sum identical to fifty in step with cent of the entire gross receipts of the assessee inside the previous yr because of such career or, as the case may be, a sum higher than the aforesaid sum claimed to had been earned with the aid of the assessee, shall be deemed to be the earnings and profits of such career chargeable to tax underneath the pinnacle “earnings and profits of enterprise or profession”.

 Presumptive Taxation Scheme underneath section 44AE:

Eligibility:

The presumptive taxation scheme of sections 44AE may be followed with the aid of a person who’s engaged in the business of plying, hiring or leasing items carriages and who does no longer very own greater than 10 goods automobiles at any time at some point of the year.
As consistent with the steerage notice issued with the aid of the ICAI on Tax Audit,

Even where the assessee opts for presumptive taxation, the tax auditor ought to provoke upon the assessee that it’d be beneficial to maintain a few basic statistics to aid the turnover/gross receipts declared for presumptive taxation.

way of computation of taxable commercial enterprise profits in case of someone adopting the presumptive taxation scheme of phase 44AE:

In case of someone who is choosing the presumptive taxation scheme of segment 44AE, the provisions of allowance/disallowances as provided for below the earnings-tax Act, will no longer observe and income computed on the presumptive rate of Rs. 7,500 according to goods vehicle in keeping with month could be the final earnings. In different words, the income computed on the charge of Rs. 7,500 according to goods automobile per month may be the very last taxable income of the enterprise and no in addition expenses may be allowed or disallowed.

Presumptive Taxation Scheme beneath section 44AF:

This section deals with the unique provisions referring to computation of profit & profits from retail business.

in the case of an assessee engaged in retail alternate in any goods or products, a sum equal to five in line with cent of the whole turnover within the previous yr as a result of such business or, as the case can be, a sum higher than the aforesaid sum as declared via the assessee in his go back of income shall be deemed to be the profits and profits of such enterprise chargeable to tax under the head “earnings and gains of enterprise or profession”

supplied that not anything contained on this sub-phase shall observe in recognize of an assessee whose general turnover exceeds an amount of forty lakh rupees within the previous 12 months.

section 44B:

This segment offers with the special provision for computing profits and gains of transport commercial enterprise in the case of non-residents.

in the case of an assessee, being a non-resident, engaged within the commercial enterprise of operation of ships, a sum identical to seven and a 1/2 per cent of the mixture of the quantities as specified shall be deemed to be the earnings and profits of such enterprise chargeable to tax underneath the head “profits and gains of business or career”.

distinctive quantity for the cause of this section:

the quantity paid or payable (whether in or out of India) to the assessee or to any character on his behalf as a result of the carriage of passengers, cattle, mail or items shipped at any port in India; and
the amount acquired or deemed to be obtained in India through or on behalf of the assessee on account of the carriage of passengers, farm animals, mail or items shipped at any port outdoor India.
Section 44BB:

This section deals with special provision for computing income and gains in connection with the commercial enterprise of exploration, and so on., of mineral oils.

inside the case of an assessee, being a non-resident, engaged in the business of providing offerings or facilities in reference to, or imparting plant and equipment on rent used, or for use, within the prospecting for, or extraction or production of, mineral oils, a sum same to ten per cent of the aggregate of the amounts distinct below shall be deemed to be the profits and gains of such enterprise chargeable to tax beneath the pinnacle “earnings and gains of enterprise or profession”.
specified quantity for the motive of this segment:

the amount paid or payable (whether in or out of India) to the assessee or to any individual on his behalf attributable to the provision of services and centers in reference to, or supply of plant and machinery on hire used, or to be used, within the prospecting for, or extraction or production of, mineral oils in India; and
the amount received or deemed to be receivedin India via or on behalf of the assessee resulting from the provision of offerings and facilities in reference to, or supply of plant and machinery on rent used, or to be used, inside the prospecting for, or extraction or manufacturing of, mineral oils outdoor India.
♥ section 44BBA:

This section deals with the unique provision for computing income and gains of the commercial enterprise of operation of aircraft inside the case of non-residents.

within the case of an assessee, being a non-resident, engaged within the enterprise of operation of aircraft, a sum same to 5 in keeping with cent of the mixture of the amounts as specific beneath will be deemed to be the earnings and profits of such business chargeable to tax under the top “profits and gains of business or career”.

specific amount for the reason of this segment:

the amount paid or payable (whether in or out of India) to the assessee or to any man or woman on his behalf attributable to the carriage of passengers, livestock, mail or goods from any area in India; and
the amount obtained or deemed to be received in India by means of or on behalf of the assessee resulting from the carriage of passengers, farm animals, mail or items from any location outdoor India.
Section 44BBB:

This segment deals with the special provision for computing profits and gains of foreign organizations engaged inside the enterprise of civil creation, etc., in sure turnkey energy tasks.

in the case of an assessee, being a foreign business enterprise, engaged within the commercial enterprise of civil construction or the enterprise of erection of plant or equipment or checking out or commissioning thereof, in reference to a turnkey strength task authorised by way of the valuable authorities in this behalf, a sum same to 10 in step with cent of the amount paid or payable (whether or not in or out of India) to the stated assessee or to any character on his behalf on account of such civil production, erection, testing or commissioning shall be deemed to be the income and gains of such business chargeable to tax beneath the top “income and profits of enterprise or career”.

Section 44D:

This segment offers with the unique provisions for computing profits through way of royalties, and many others., in the case of foreign agencies:

As in line with this section,

inside the case of an assessee, being a overseas agency,—

The deductions admissible beneath the stated sections in computing the profits with the aid of manner of royalty or prices for technical offerings obtained before the 1st day of April, 1976, shall not exceed in the mixture twenty in step with cent of the gross amount of such royalty or charges as decreased by using so much of the gross amount of such royalty as includes lump sum attention for the transfer outdoor India of, or the imparting of statistics outdoor India in recognize of, any facts, documentation, drawing or specification referring to any patent, invention, model, layout, mystery system or procedure or exchange mark or comparable belongings;
The deductions admissible beneath the said sections in computing the profits with the aid of manner of royalty or prices for technical offerings acquired earlier than the first day of April, 1976, shall no longer exceed inside the combination twenty according to cent of the gross quantity of such royalty or prices as decreased with the aid of so much of the gross quantity of such royalty as consists of lump sum attention for the switch out of doors India of, or the imparting of records out of doors India in appreciate of, any facts, documentation, drawing or specification relating to any patent, invention, version, design, secret system or procedure or exchange mark or comparable property;
Section 44DA:

This phase deals with the special provision for computing earnings with the aid of way of royalties, and many others., in case of non-citizens.

As consistent with this phase, The profits by means of way of royalty or prices for technical offerings acquired from government or an Indian subject in pursuance of an agreement made by using a non-resident (no longer being a organisation) or a overseas employer with authorities or the Indian challenge after the thirty first day of March, 2003, wherein such non-resident (now not being a corporation) or a overseas enterprise incorporates on business in India through a everlasting status quo situated therein, or performs professional offerings from a set location of profession situated therein, and the right, assets or contract in respect of which the royalties or expenses for technical offerings are paid is effectively connected with such everlasting status quo or fixed vicinity of career, as the case may be, will be computed beneath the pinnacle “earnings and gains of commercial enterprise or profession” in accordance with the provisions of this Act :

impact of section 44AB in the above stated sections:

notwithstanding whatever contained inside the foregoing provisions of the above sectios, an assessee may additionally declare lower profits and gains than the earnings and profits specific in the sections, if he continues and keeps such books of account and different files as required below sub-section (2) of phase 44AA and receives his bills audited and furnishes a record of such audit as required below section 44AB.

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