PRESUMPTIVE TAXATION UNDER INCOME TAX

Dave ParthWRO:0416613

INTRODUCTION:

• Presumptive taxation under income tax act, 1961 means a form of assessing tax liability using indirect method/presumptive method or on assumption basis. The term "presumptive" is used to indicate that there is a legal presumption that the taxpayer's income is no less than the amount resulting from application of the indirect method.

44AD : Special provision for computing profit of business under presumptive basis

• applicable to individual, HUF, partnership firm excluding LLP and who covered in sec.44AE

• turnover of the business should not exceed Rs.2 crore.

• 8% of total turnover of the business • shall not require maintaining his books of account

44ADA: Special provision for computing profit of Professional under presumptive basis

• applicable to individual, HUF, partnership firm excluding LLP and who covered in sec.44AE

• Gross Receipt of the business should not exceed Rs.50 Lakhs.

• 50% of total Gross Receipt of the Profession. • shall not require maintaining his books of account

44AE: Provision for computation of income of estimated basis for people engaged in transport business.

• applicable to that assesses who engaged in the business of hiring, playing, or leasing the goods carriage

• not more than 10 goods carriage at any time in previous year

• It is also apply to goods carriage taken on hire purchase or on installment.

• Estimated profit will be taken

– 5000/- per month or part of the month, per truck, for heavy goods vehicle. (Heavy goods carriage means weight exceed 12MT)

– However from 01.04.2015 the amount of profit is increased to Rs.7500/- as per the Finance (No. 2 ) Act, 2014.

– 4500/- per month part of the month, per truck, for other than heavy goods carriage

• shall not require maintaining his books of account

44B: Provision for computing profits and gains of shipping business in the case of non- resident.

• In the case of non-residents, such profits and gains will be taken at an amount equal to 7.5% of the amount paid or payable to the non-resident or to any other person on his behalf on account of the carriage of passengers, live stocks, mail or goods shipped at a port in India also amount received or deemed to be received in India on account of the carriage of passengers, livestocks,mail or goods shipped at any port outside India.

44BB: Special provision for computing profit and gains in connection with the business of exploration etc., of mineral oils.

• a non-resident assessee engaged in business of providing services or facilities in connection with or supplying plant and machinery on hire, used or to be used, in the prospecting for, or extractions or production of mineral oils.

• 10% of the amount paid or payable to, all the amount received or receivable by the assessee for provision of such services of facilities or supply of plant and machinery shall be deemed to be the taxable income os such known resident assessee

• Plant” means ships, aircraft, vehicles, drilling units, scientific apparatus and equipment, used for the purpose of the said business.

• “Minerals” means petroleum and natural gas.

44BBA: Provision for computing profit and gains of the business of operation of aircraft in the case of non-resident.

• the business of operation of aircraft of non-resident.

• at the flat rate of 5% of the amount received or receivable for carriage of passengers, live stocks, mail or goods from any place in India or amount received or deemed to be received within India on account of the such carriage from place outside India.

44BBB: Provision for computing profit and gains of foreign companies engaged in the business of civil construction etc., in certain turnkey power project.

• The income of foreign companies who are engaged in the business of civil construction or erection or testing or commissioning of plant or machinery in connection with a turnkey power project

• shall be deemed at 10% of the amount paid or payable to such assessee or to any person on his behalf, whether in or out of India.

• should be approved by the central government.

• erection of plant or machinery or testing or commissioning thereof will include lying of transmission lines and systems.

44C : Deduction of head office expenditure in the case of non-resident

• Non-resident who carry on business in India through their branches.

• The deduction in respect of head office expenses will be – An amount equal to 5 per cent of the “adjusted to

tal income” for the relevant year: OR– The actual amount of the head office expenditure

attributable to the business in India whichever is less.

• Adjusted total income means a income before applying unabsorbed depreciation, unabsorbed business loss, deduction u/s 80C to 80U.

• “Head office expenditure” means executive and general administration expenses incurred by the assessee outside of India.

44D: Provision for computing income by way of royalties etc., in the case of foreign companies.

• Royalties and fees for technical services received from the government or an Indian concern by a non-resident or a foreign company in pursuance of an agreement entered in pursuance of an agreement entered into after 31st march , 2003 shall be computed under the head “business income” in accordance with the provisions of the income tax act.

CASE LAW

DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)

vs. FMARINE CONTAINER LINES NV

• Inland Haulage Charges earned by Foreign Company from it’s customers in respect of transportation of goods from Inland Container Depots (ICDs) to Port where goods were loaded in ships for international traffic are part of income derived from operation of ships, and are covered under Article 8 of DTAA and thus not taxable as business profits in India.

• Decision is in favor of Assessee.

CONCLUSION:

• helpful to both –to the revenue department as well as to the businessmen.

• it inspires the persons to pay tax regularly• This provision of this act is beneficial to small

scale industries working at a lower level and it also encourages foreign industries to develop their business in India.

THANK YOU