Presumptive Taxation Scheme : Everything you need to know

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Hiral Vakil

Advance Tax
Presumptive Tax
Section 44AD
Section 44ADA
Section 44AE

What is Presumptive Taxation Scheme?

The presumptive taxation scheme was introduced by the Income Tax Act, 1961 to give relief to small taxpayers from the tedious job of maintaining books of account and from getting the accounts audited. Generally, a person who receives income from a business or profession maintains books of accounts and prepares a balance sheet to understand the financial position of their business or profession over the financial year.

Any individuals, HUF, or partnership firms who avail presumptive taxation scheme should declare income at a predefined rate. Thus, they need not go through the cumbersome task of maintaining books of accounts and audit. Following are the presumptive taxation schemes available to small taxpayers as per Income Tax Act:

Presumptive Taxation Scheme for Business

This scheme is designed to give relief to small taxpayers engaged in any business from maintaining any books of accounts. However, it does not include the business of plying, hiring or leasing of goods carriages referred to in section 44AE. Further, the Income Tax Provisions for maintaining books of accounts under Section 44AA & Audit under Section 44AB will not apply. The following assessees can avail Presumptive taxation under section 44AD:

ITR for Businesses u/s 44AD (Presumptive Scheme)
CA Assisted Income Tax Return filing plan for Individuals & HUFs with business income covered under Presumptive Taxation Scheme.
[Rated 4.8 stars by customers like you]
ITR for Businesses u/s 44AD (Presumptive Scheme)
CA Assisted Income Tax Return filing plan for Individuals & HUFs with business income covered under Presumptive Taxation Scheme.
[Rated 4.8 stars by customers like you]

Non-Resident Indians (NRI) can not avail of the benefit of this scheme. Also, a person who has made any claim towards deduction under section 10A/10AA/10B/10BA or under section 80HH to 80RRB in the relevant year is not eligible for this scheme.

Section 44AD - Presumptive Taxation for Business
Business with sales or turnover upto 2 crore & dont wish to maintain accounts should report atleast 6% or 8% as presumptive income under Section 44AD
Read More
Section 44AD - Presumptive Taxation for Business
Business with sales or turnover upto 2 crore & dont wish to maintain accounts should report atleast 6% or 8% as presumptive income under Section 44AD
Read More

Presumptive Taxation Scheme for Professions

Earlier professionals were kept out of presumptive taxation scheme. However, in budget 2016 the government has extended a presumptive taxation scheme to the professionals too. Hence, professionals can also opt for presumptive taxation under section 44ADA. This benefit is available from FY 2016-17 onwards.

ITR for Professions u/s 44ADA (Presumptive Scheme)
CA Assisted Income Tax Return filing plan for Individuals & HUFs with professional income covered under Presumptive Taxation Scheme.
[Rated 4.8 stars by customers like you]
ITR for Professions u/s 44ADA (Presumptive Scheme)
CA Assisted Income Tax Return filing plan for Individuals & HUFs with professional income covered under Presumptive Taxation Scheme.
[Rated 4.8 stars by customers like you]

An assessee in a specified profession having gross receipts up to INR 50 lacs, can opt for Presumptive Taxation under Section 44ADA. It saves them from the burden of maintaining books of accounts and go for tax audit as per Section 44AB.

Section 44ADA - Presumptive Taxation for Profession
Profession with gross receipts upto 50 lacs who dont wish to maintain books of accounts should report atleast 50% as presumptive income under Section 44ADA
Read More
Section 44ADA - Presumptive Taxation for Profession
Profession with gross receipts upto 50 lacs who dont wish to maintain books of accounts should report atleast 50% as presumptive income under Section 44ADA
Read More

Presumptive Taxation Scheme Under Section 44AE

The scheme of section 44AE is designed to give relief to small taxpayers engaged in the business of plying, hiring or leasing of goods carriages.

Eligible Business as per Section 44AE

Characteristics of the Scheme u/s 44AE:

Round off part of a month to the next month. For instance, if you have owned a goods carriage for 7 months and 5 days, the net income shall be calculated as if the carriage was owned for 8 months.

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File Your Tax Return

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FAQs

Can a doctor opt for presumptive taxation scheme?

Yes. With effect from the Financial year 2016-17, any professional be it a doctor or a chartered accountant or a lawyer can opt for Presumptive taxation scheme u/s 44ADA. However, the only condition is that the income from such a profession should not exceed INR 50 lacs and profits will be taken as 50% of such professional receipts.

Which businesses are not eligible for presumptive taxation  scheme?

The scheme of section 44AD is designed to give relief to small taxpayers engaged in any business, except the following businesses:
1. Business of plying, hiring or leasing goods carriages as per Section 44AE.
2. A person who is carrying on any agency business.
3. A person who is earning income in the nature of commission or brokerage
4. Any business whose total turnover or gross receipts exceeds two crore rupees.​

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