Presumptive profits and gains of business of plying, hiring or leasing goods carriages: Clause 58 of the Income Tax Bill, 2025 vs. Section 44AE of the Income Tax Act, 1961

Clause 58 Special provision for computing profits and gains of business or profession on presumptive basis in case of certain residents.

Income Tax Bill, 2025

Introduction

The Income Tax Bill, 2025 introduces Clause 58, which aims to streamline the computation of profits and gains from certain businesses or professions on a presumptive basis for specific residents. This clause is particularly relevant for businesses involved in plying, hiring, or leasing goods carriages. The provision is designed to simplify tax compliance and reduce the administrative burden on small taxpayers. In contrast, Section 44AE of the Income Tax Act, 1961, provides a similar framework for computing income from the business of plying, hiring, or leasing goods carriages. This article provides a detailed analysis of Clause 58, focusing on its application to the business of goods carriages, and compares it with the existing provisions u/s 44AE.

Objective and Purpose

Clause 58 of the Income Tax Bill, 2025, seeks to provide a simplified tax regime for small taxpayers engaged in specific businesses or professions, including the business of goods carriages. The legislative intent is to ease compliance by allowing taxpayers to declare income on a presumptive basis, thereby minimizing the need for detailed bookkeeping and audits. This approach is particularly beneficial for small businesses with limited resources. Similarly, Section 44AE of the Income Tax Act, 1961, was introduced to offer a straightforward method for computing income from goods carriages, reducing the compliance burden on small transport operators.

Detailed Analysis

Clause 58 of the Income Tax Bill, 2025

Clause 58 outlines the special provisions for computing profits and gains on a presumptive basis. The key elements of this clause, particularly for the business of plying, hiring, or leasing goods carriages, are as follows:

• Eligibility: The provision applies to assessees who own not more than ten goods carriages at any time during the tax year.
• Computation of Income: The income is computed based on the type of vehicle:
  • For heavy goods vehicles, income is calculated at Rs. 1,000 per ton of gross vehicle weight or unladen weight for each vehicle.
  • For other vehicles, income is calculated at Rs. 7,500 per goods carriage for every month or part of a month during which the vehicle is owned.
• Higher Income Declaration: If the income claimed to have been actually earned is higher than the presumptive income, the higher amount is considered.
• Record Keeping and Audit: Assessees claiming lower profits than the presumptive income must maintain books of account and get them audited.
• Non-Applicability of Other Deductions: No other deductions or allowances are permitted against the presumptive income.
• Firm-specific Provisions: For firms, salary and interest paid to partners are deductible, subject to specified conditions.
• Depreciation: The written down value of assets is computed as if depreciation was claimed and allowed.

Section 44AE of the Income Tax Act, 1961

Section 44AE provides a similar framework for computing income from goods carriages. The key features include:

• Eligibility: Applicable to assessees owning not more than ten goods carriages during the previous year.
• Computation of Income:
  • For heavy goods vehicles, income is Rs. 1,000 per ton of gross vehicle weight or unladen weight for each month or part of the month.
  • For other vehicles, income is Rs. 7,500 per month or part of the month.
• Higher Income Declaration: Similar provisions for declaring higher actual income.
• Deduction of Salary and Interest: For firms, salary and interest to partners are deductible.
• Depreciation: Written down value of assets assumes depreciation is claimed and allowed.

Practical Implications

Both Clause 58 and Section 44AE aim to simplify tax compliance for small transport operators by allowing presumptive taxation. This approach reduces the need for detailed accounting and audits, making it easier for small businesses to comply with tax regulations. However, taxpayers must carefully consider whether to opt for presumptive taxation, as it may not always be beneficial, particularly if actual profits are lower than the presumptive income.

Comparative Analysis

The primary difference between Clause 58 and Section 44AE lies in their legislative context and minor procedural variations. Clause 58 is part of a new legislative framework aimed at broader tax reform, while Section 44AE is an established provision under the existing Income Tax Act. Both provisions share similar objectives and mechanisms, with slight differences in procedural requirements and terminologies.

Conclusion

Clause 58 of the Income Tax Bill, 2025, and Section 44AE of the Income Tax Act, 1961, both provide a simplified tax regime for small transport operators. While Clause 58 introduces these provisions as part of a broader legislative overhaul, Section 44AE has been a longstanding provision. Taxpayers must evaluate their specific circumstances to determine the most beneficial approach. Future reforms may further refine these provisions to enhance clarity and compliance.

Full Text:

Clause 58 Special provision for computing profits and gains of business or profession on presumptive basis in case of certain residents.

Dated: 10-3-2025