Presumptive Scheme for Transporters

Introduction

Section 58(2) [Table S. No. 2] is a presumptive taxation scheme. It is applicable to every assessee who is engaged in the business of plying, hiring and leasing of goods carriage. Under this scheme, the eligible taxpayers can compute the taxable income on presumptive basis if eligible assessee does not own more than 10 goods carriage vehicle during the year.

1. About the Scheme

1.1. What is presumptive taxation scheme?

Income-tax Act allows small transporters to calculate and pay tax on presumptive basis. This scheme has been introduced to reduce the burden of compliances on small transporters. Thus, if an entity opts for presumptive tax scheme, it can pay tax on presumption basis without maintaining the books of accounts.

1.2. Who can opt for Scheme?

The presumptive taxation scheme under Section 58(2) [Table S. No. 2] can be opted by any person who is engaged in the business of plying, hiring or leasing of goods carriages and who does not own more than 10 goods vehicles at any time during the year.

For this purpose, a taxpayer, who is in possession of a goods carriage, whether taken on hire-purchase or on instalments and for which whole or part of the amount payable is still due, shall be deemed to be the owner of such goods carriage vehicle.

JCB, which is an earth moving machinery used for excavation of earth, lifting of heavy materials, etc., in process of construction, cannot be termed as a ‘goods carriage’ and income from hiring of JCB cannot be computed by applying provisions of Section 58(2) [Table S. No. 2]

1.3. How much is presumptive income under the scheme?

1.3-1. In case of Heavy Good Vehicles

In case of heavy goods vehicle, the gross vehicle weight of which exceeds 12,000 kgs, the presumptive income for every goods carriage vehicle shall be Rs. 1,000 per ton of gross vehicle weight or unladen weight. The presumptive income shall be calculated at this rate for every month or part of a month during which the goods vehicle is owned by the taxpayer during the year. If assessee wishes to declare income more than the presumptive income, he can offer to pay tax on such higher income.

1.3-2. In case of other than Heavy Good Vehicles

In case of other goods vehicle, the gross vehicle weight of which is 12,000 kgs or less, the presumptive income for every goods carriage vehicle shall be Rs. 7,500. The presumptive income shall be calculated at this rate for every month or part of a month during which the goods vehicle is owned by the taxpayer during the year. If assessee wishes to declare income more than the presumptive income, he can offer to pay tax on such higher income.

1.4. Can assessee declare income lower than presumptive income?

The assessee may claim lower profits and gains than the deemed profits and gains computed in accordance with Section 58(2) [Table S. No. 2] if his total income exceeds the maximum amount which is not chargeable to tax. However, in that situation, he will have to maintain the books of account as per Section 62 and get them audited under Section 63.

2. Other Requirements of Scheme

2.1. No deduction for expenses

All the deductions allowable under the Act  shall be deemed to have been allowed and no further deduction is allowed.

As depreciation on capital assets is deemed to have been allowed, the WDV of capital assets is deemed to have been calculated as if the eligible assessee had claimed and allowed the depreciation for each relevant tax years.

2.2. No disallowance of expense

As all expenditures are deemed to have been allowed, no disallowance shall be made for such expenditure under any of the provisions of Section 35, Section 29 or Section 37.

2.3. Payment of advance tax

An assessee, who opts for the presumptive scheme under this provision, is also required to pay advance tax. However, unlike taxpayers opting for presumptive taxation scheme under Section 58(2) [Table S. No. 1 & 3], these taxpayers doesn’t have any option to pay advance tax in single installment on or before March 15, they have to pay their advance tax in four instalments.

2.4. Accounts and Audit

An assessee opting for the above scheme shall be exempted from maintenance of books of account related to such business as required under Section 62 and get them audited as required under Section 63. Further while computing the monetary limits prescribed for applicability of these provisions, gross receipts or income as the case may be shall be excluded.

However, if the assessee claims that his profits are lower than the presumptive income of Rs. 1,000 per ton or Rs. 7,500 per vehicle, as the case may be, he is required to maintain the books of account and get them audited by a Chartered Accountant and furnish a report of such audit.

References

Gaylord Constructions v. ITO [2008] 175 Taxman 99 (Coch.)

This article is general information and not tax advice. Provisions change. Confirm your position with a qualified professional before acting.