1 week ago

Presumptive Taxation Rules: Three Sections Simplify Small Taxpayer Compliance

Presumptive taxation scheme: What are the 3 sections and who can opt for them — key income rules explained · livemint.com

Presumptive taxation is a simpler way for some taxpayers to calculate business or professional income.

Instead of listing every expense, they use a government-set percentage or formula.

Section 44AD is for eligible small businesses.

Section 44ADA is for certain professionals, such as doctors, lawyers and engineers.

Section 44AE is for businesses that operate goods vehicles.

Each section has different limits and eligibility rules.

People using Sections 44AD and 44ADA must pay their full advance tax by 15 March.

The scheme can reduce bookkeeping and tax-audit requirements, but taxpayers usually cannot deduct business expenses separately.

Key facts

Section 44AD eligibility: Resident individuals, resident HUFs and resident partnership firms other than LLPs carrying on eligible businesses.
Section 44AD limits: ₹2 crore turnover, increasing to ₹3 crore when cash receipts do not exceed 5% of total turnover or gross receipts.
Section 44AD income rate: Generally 8% of turnover or gross receipts, or 6% for receipts through specified digital or banking modes.
Section 44ADA limits and rate: ₹50 lakh in gross receipts, increasing to ₹75 lakh when cash receipts do not exceed 5%; 50% of gross receipts is presumed taxable income.
Section 44AE eligibility: Any taxpayer operating goods-carriage businesses, provided they do not own more than 10 goods vehicles at any time during the year.
Section 44AE income calculation: ₹7,500 per month or part-month for each non-heavy goods vehicle, or ₹1,000 per tonne of gross vehicle weight per month or part-month for each heavy goods vehicle.
Advance tax: Sections 44AD and 44ADA require the entire advance-tax liability to be paid by 15 March; Section 44AE has no special concession.

livemint.com · 1 week ago