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PRESUMPTIVE TAXATION
Sections 44AD, 44AE and 44AF cover special provisions of computing profits on a pre-
sumptive basis. All the schemes are optional at the discretion of the assessee. Since
income is estimated, these are also known as ‘estimated income schemes’.
Conditions and manner of computation common to all three sections are given at the end after
specific provisions applying to each section. In a case the assessee does not desire to opt for the
scheme, if he maintains such books of account and other documents as required under sub-
section section 44AA and gets his accounts audited and furnishes a report of such audit as
required under section 44AB.
1] Applies to:
Any person engaged in the business of civil construction or supply of labour for civil
construction work, if his gross receipts from the above business do not exceed Rs. 40
lakhs. The term Civil construction covers repair of any building or other structures or
road and execution of any works contract, including electrical fittings, plumbing job
etc.
The section applicable to any assessee engaged in the business of civil construction or
supply of labour for civil construction. Therefore, any sub-contractor is also covered
under the section provision - Manohar Ram Chandra Patil v. Union of India [2003] 260
ITR 87 (Ori.).
2] Deemed Income:
8% of the gross receipts payable or paid to such person or any higher amount voluntar-
ily declared by him shall be deemed to be his income from such business.
1] Applies to:
Any person engaged in the business of plying, leasing or hiring of trucks if he owns not
more than ten goods carriages at any time during the previous year including those
taken on hire purchase or on installments.
This scheme does not apply to those who operate trucks on hire without owning them
(Circular 684, dt. 10-6-1994)
2] Income
Type of Goods Carriage Estimated Income
Heavy Goods Vehicle Rs. 3,500 for every month (or part of a month).
Other than Heavy goods Rs. 3,150 for every month (or part of a month).
vehicle
Income is estimated as above for the period during which the goods carriage is owned by the
taxpayer
Refer to ‘[A] Conditions’ and ‘[B] Computation’ below.
1] Applies to:
Any person engaged in the business of retail trade in any goods or merchandise shall
be covered by this provision, if his turnover from the above business does not exceed
Rs. 40 lakhs.
2] Tax Charge:
5% of the total turnover of such person or a higher sum voluntarily declared by him
shall be deemed to be his income from such business.
Refer to ‘[A] Conditions’ and ‘[B] Computation’ below.
Common Conditions and Computation method for Estimated Income Schemes: A] Condi-
tions:
All deductions under sections 30 to 38 including depreciation are deemed to have been al-
lowed. No further deduction allowed under these sections.
The written down value of asset used in the business will be computed as if depreciation, as
applicable, was allowed.
It will be assumed that disallowances if any under sections 40, 40A and 43B were considered
by calculating the income estimated above.