File Early; Beat the Rush – Avail the Benefits of Presumptive Taxation Scheme

Feb 18, 2019 | 0 comments

The Presumptive Taxation Scheme was framed by the Income Tax Authority of India, under section 44AD, 44ADA, and 44AE of the Income Tax Act, 1961 to provide relief to the small tax payers from maintaining books of accounts, and getting their accounts audited. The assessees adopting this scheme are required to file their Income Tax Returns for the Assessment Year 2018-19 on or before 31st July 2018. An assessee adopting the Presumptive Taxation Scheme can declare income at a prescribed rate and thereby claim the relief. In other words, income of the assessee is calculated on presumptive basis rather than on actual basis. This scheme is most likely to benefit small traders, businessmen, and professionals. It cannot be adopted by a non-resident and any person other than an individual, a HUF, a partnership firm (not a Limited Liability Partnership). Furthermore, an assessee who has made any claim towards deductions under section 10A/10AA/10B/10BA or under section 80HH to 80RRB in the relevant year cannot adopt this scheme.

Assesses claiming relief under this scheme are subject to the following benefits:

  • No requirement of maintaining books of accounts;
  • 8% of the Gross Receipts or Total Turnover treated as income in case of Business (in case of amounts received by Account Payee cheques/draft through digital transactions, only 6% is treated as income) having turnover less than ₹ 2 crores;
  • 50% of the Gross Receipts to be treated as income in case of professionals having turnover less than ₹ 50 lakhs;
  • ₹7500/- per goods carriage per month ( subject to maximum 10 goods carriages) is deemed as income in case of persons engaged in business of plying, hiring or leasing of goods carriage.

Assesses claiming relief under this scheme are subject to the following benefits:

  • Individuals and HUF having total income exceeding ₹ 5 lakhs or claiming any refund in return (excluding Individuals of the age of 80 years or more who are furnishing returns in Form No. ITR-1 or ITR-2)
  • Individual and HUF being a resident other than non-ordinary resident, having any foreign asset/ income or claiming any foreign tax relief
  • Person filing ITR in Form No. 3, 4, 5 or 7
  • The presumptive taxation scheme is a positive move for the Medium and Small Medium Enterprises (MSMEs) as it has reduced the compliance requirements. However, it is to be noted that once the assessees opt for the Presumptive Taxation Scheme, they are required to follow the same for the next five years. If they fail to do so, then they cannot avail the benefit under the scheme for the next five years. The assessees will be required to keep and maintain books of accounts and shall be liable for tax audit as per section 44AB from the assessment year in which they opt out of the scheme.

    Therefore, assessees must file their returns at the earliest and not wait till the last hour to do so.


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