Section 44AE – Presumptive Taxation for Transport Business (Trucks & Goods Vehicles)

Introduction to Section 44AE

Section 44AE of the Income Tax Act, 1961, provides a simplified presumptive taxation scheme for individuals and entities engaged in the business of plying, hiring, or leasing goods carriages. This section aims to reduce the compliance burden for small transporters by allowing them to declare income at a fixed rate per vehicle per month, without the need for maintaining detailed books of accounts or undergoing a mandatory tax audit, provided certain conditions are met.

It is specifically designed for businesses involved with goods vehicles, offering a straightforward approach to tax computation.

Eligibility Criteria for Section 44AE

To opt for the presumptive taxation scheme under Section 44AE, the following conditions must be satisfied:

• Nature of Business: The assessee must be engaged in the business of plying, hiring, or leasing goods carriages. This scheme does not apply to passenger-carrying vehicles.
• Number of Vehicles Owned: The assessee must not own more than ten goods carriages at any point in time during the previous year. This limit includes vehicles taken on hire purchase or instalments, even if the full payment is not yet made. If the number of vehicles exceeds ten at any time, the assessee becomes ineligible for this section for that financial year.
• Assessee Type: Unlike Section 44AD and Section 44ADA, Section 44AE is available to all types of assessees, including individuals, Hindu Undivided Families (HUFs), partnership firms, and companies.

Presumptive Income Rate under Section 44AE

The income calculation under Section 44AE depends on the type of goods carriage:

• For Heavy Goods Vehicles (HGV): A heavy goods vehicle is defined as any goods carriage whose gross vehicle weight (GVW) or unladen weight exceeds 12,000 kilograms (12 tonnes). The presumptive income for such vehicles is ₹1,000 per ton of gross vehicle weight (or unladen weight) per month or part of a month for which the vehicle is owned by the assessee in the previous year.
• For Other Goods Vehicles (Light Goods Vehicles - LGV): For any goods carriage other than a heavy goods vehicle (i.e., with GVW up to 12,000 kg), the presumptive income is ₹7,500 per vehicle per month or part of a month for which the vehicle is owned by the assessee in the previous year.

The assessee can declare a higher income than the prescribed rates if their actual income is more.

Important Note: A part of a month is considered a full month for calculation purposes.

Examples:

Example 1 (Light Goods Vehicle): Mr. Sharma owns 3 light goods vehicles. He owned all 3 vehicles for the entire financial year (12 months).

• Presumptive income per vehicle per month = ₹7,500
• Total presumptive income = 3 vehicles × ₹7,500/month × 12 months = ₹2,70,000

Example 2 (Heavy Goods Vehicle): M/s. Transporters LLP owns 2 heavy goods vehicles, each with a gross vehicle weight of 15 tonnes. They owned both vehicles for 10 months in the financial year.

• Presumptive income per HGV per month = 15 tonnes × ₹1,000/ton = ₹15,000
• Total presumptive income = 2 vehicles × ₹15,000/month × 10 months = ₹3,00,000

Benefits of Opting for Section 44AE

Opting for Section 44AE offers significant advantages to eligible transporters:

• No Maintenance of Books of Accounts: Taxpayers are relieved from the obligation of maintaining detailed books of accounts as per Section 44AA.
• Exemption from Tax Audit: If income is declared at the prescribed presumptive rate (or higher), the business is exempt from mandatory tax audit under Section 44AB.
• Simplified Income Computation: The fixed rate system simplifies the calculation of taxable income, making tax compliance less complex and time-consuming.
• Focus on Business: Reduced administrative burden allows transporters to focus more on their core operations.

When Tax Audit Becomes Mandatory under Section 44AE

While generally exempt, a tax audit becomes mandatory under Section 44AE in specific circumstances:

• Declaring Lower Profits: If the assessee declares profits lower than the prescribed rates (₹1,000/ton or ₹7,500/vehicle) and their total income exceeds the basic exemption limit. In this situation, they are required to maintain books of accounts as per Section 44AA and get them audited under Section 44AB.
• Exceeding Vehicle Limit: If the number of goods carriages owned at any time during the previous year exceeds ten, the assessee becomes ineligible for Section 44AE. In such cases, regular provisions of the Income Tax Act regarding maintenance of books and tax audit (44AA and 44AB) would apply based on turnover limits.

Filing Income Tax Return under Section 44AE

Taxpayers opting for Section 44AE typically file their Income Tax Return using ITR-4 (Sugam) Form. This simplified form is designed for individuals, HUFs, and partnership firms (other than LLPs) who opt for presumptive taxation under Section 44AD, 44ADA, and 44AE.

The due date for filing ITR for non-audit cases is generally July 31st of the assessment year. For the Financial Year 2024-25 (Assessment Year 2025-26), the due date for non-audit taxpayers has been extended to **September 15, 2025**.

For more specific return due dates and details, it's always advisable to refer to the latest official notifications from the Income Tax Department.

Other Important Considerations

• No Business Expense Deductions: When income is computed on a presumptive basis under Section 44AE, all expenses (including depreciation) related to the business are deemed to have been allowed. Therefore, no further deductions under Sections 30 to 38 of the Income Tax Act can be claimed. However, deductions under Chapter VI-A (e.g., 80C, 80D, etc.) are still permissible from the declared presumptive income.
• Depreciation: Although depreciation cannot be claimed as an expense when opting for Section 44AE, the written down value (WDV) of the assets used in the business will be calculated as if depreciation has been claimed and allowed. This is important for future calculations if the assessee opts out of the scheme or sells the asset.
• Advance Tax: Taxpayers opting for Section 44AE are required to pay the entire amount of Advance Tax on or before March 15th of the financial year.
• Cash Expenses Limit: For transporters, the cash expense limit for claiming deductions (if not opting for presumptive scheme or in specific cases) is higher at ₹35,000 instead of the general ₹10,000. However, under Section 44AE, no expenses are individually allowed.