The Presumptive Taxation Scheme is a simplified tax filing mechanism introduced by the Income Tax Department to ease the compliance burden on small businesses and professionals. For the Assessment Year (AY) 2024-25, this scheme continues to provide significant benefits by allowing eligible taxpayers to declare income at a prescribed rate without maintaining detailed books of accounts. This article provides a comprehensive guide to the Presumptive Taxation Scheme for AY 2024-25, covering key features, eligibility criteria, and compliance requirements.

Overview of Presumptive Taxation

The Presumptive Taxation Scheme aims to simplify the tax filing process for small businesses and professionals by allowing them to declare income at a predetermined rate. This scheme is governed under sections 44AD, 44ADA, and 44AE of the Income Tax Act, 1961. Here are the key features:

Simplified Compliance: No need to maintain detailed books of accounts.

Easy Tax Calculation: Income is computed on a presumptive basis at a fixed percentage of turnover or gross receipts.

Lower Compliance Costs: Reduced administrative burden and cost of compliance.

Section 44AD: Presumptive Taxation for Small Businesses

Eligibility:

Available to resident individuals, Hindu Undivided Families (HUFs), and partnership firms (excluding LLPs).

Applicable for businesses with a turnover or gross receipts up to ₹2 crore in the previous financial year.

Presumptive Income Rate:

8% of the turnover or gross receipts for non-digital transactions.

6% of the turnover or gross receipts for digital transactions (receipts received through banking channels).

Key Benefits:

No need to maintain detailed books of accounts.

No requirement to get the accounts audited under section 44AB.

Allows for easier tax calculation and compliance.

Section 44ADA: Presumptive Taxation for Professionals

Eligibility:

Available to resident individuals engaged in professions referred to in section 44AA(1), such as legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, etc.

Applicable for professionals with gross receipts up to ₹50 lakh in the previous financial year.

Presumptive Income Rate:

50% of the total gross receipts or turnover.

Key Benefits:

Simplified tax filing process.

No need to maintain detailed books of accounts.

Exemption from audit under section 44AB.

Section 44AE: Presumptive Taxation for Transporters

Eligibility:

Available to individuals, HUFs, firms, and companies engaged in the business of plying, hiring, or leasing goods carriages.

Applicable for taxpayers who own up to ten goods vehicles at any time during the previous year.

Presumptive Income Rate:

₹1,000 per ton of gross vehicle weight or unladen weight per month for heavy goods vehicles (more than 12 metric tons).

₹7,500 per month for other goods vehicles.

Key Benefits:

Simplified income declaration based on the number and type of vehicles.

No requirement to maintain detailed books of accounts.

Exemption from audit under section 44AB.

Compliance and Filing Requirements

Filing Returns:

Taxpayers opting for the presumptive taxation scheme must file their income tax return using ITR-4 (Sugam) form.

The due date for filing the return is July 31 of the assessment year.

Advance Tax:

Taxpayers under presumptive taxation need to pay 100% of advance tax by March 15 of the financial year.

No need to follow the quarterly installments for advance tax payment.

Other Important Points:

Once a taxpayer opts out of the presumptive taxation scheme, they cannot opt back in for the next five assessment years.

Taxpayers declaring lower income than the presumptive rate must maintain detailed books of accounts and get them audited under section 44AB.

Case Study Examples

Example 1: Small Business Owner

Mr. Raj, a small retail shop owner, has a total turnover of ₹1.8 crore for the financial year. He opts for the presumptive taxation scheme under section 44AD.

Presumptive Income Calculation:

For non-digital transactions (80% of turnover): 8% of ₹1.44 crore = ₹11.52 lakh

For digital transactions (20% of turnover): 6% of ₹36 lakh = ₹2.16 lakh

Total Presumptive Income: ₹13.68 lakh

Example 2: Professional Consultant

Ms. Anjali, a freelance graphic designer, has gross receipts of ₹40 lakh for the financial year. She opts for the presumptive taxation scheme under section 44ADA.

Presumptive Income Calculation:

50% of ₹40 lakh = ₹20 lakh

Total Presumptive Income: ₹20 lakh

Example 3: Goods Transporter

Mr. Singh owns 5 light goods vehicles used for his transport business. He opts for the presumptive taxation scheme under section 44AE.

Presumptive Income Calculation:

₹7,500 per vehicle per month

5 vehicles x ₹7,500 x 12 months = ₹4.5 lakh

Total Presumptive Income: ₹4.5 lakh

Conclusion

The Presumptive Taxation Scheme for AY 2024-25 provides a simplified and hassle-free way for small businesses and professionals to comply with tax laws. By understanding the key features, eligibility criteria, and compliance requirements, taxpayers can make an informed decision about opting for the scheme. This not only reduces the burden of maintaining detailed accounts but also ensures timely and accurate tax filing. Evaluate your eligibility and benefits under sections 44AD, 44ADA, and 44AE to take full advantage of this simplified tax regime.

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