My client runs six trucks, two of them well over twelve tonnes. What does he declare under s.44AE, and from which year did the per-tonne rate start?
For a heavy goods vehicle the deemed profit is one thousand rupees per tonne of gross vehicle weight or unladen weight, as the case may be, for every month or part of a month of ownership, or the amount claimed to have been actually earned from that vehicle, whichever is higher; for every other goods carriage it is seven thousand five hundred rupees a month on the same 'whichever is higher' basis. That differentiated structure, and the definition of a heavy goods vehicle as a goods carriage whose gross vehicle weight exceeds 12,000 kilograms, were substituted into s.44AE by section 16 of the Finance Act 2018 with effect from 1 April 2019 — that is, from AY 2019-20.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2019-04-01, reported as Income-tax Act 1961, s.44AE, sub-section (2) and Explanation clauses (a) and (aa) as substituted by section 16 of the Finance Act 2018 with effect from 1 April 2019. It bears on section 44AE, section 44AA, section 44AA(2), section 44AB, section 40(b), section 44AD of the Income Tax Act 1961, in Presumptive Taxation & Audit and How Tax Law Is Read matters.
Before AY 2019-20 every goods carriage, heavy or not, was at a flat seven thousand five hundred rupees a month, so an order or a computation for AY 2018-19 or earlier that applies the per-tonne rate is applying the wrong law, and one for AY 2019-20 or later that applies the flat rate to a twelve-tonne-plus vehicle understates the deemed profit substantially. Three further points decide most s.44AE disputes. First, the section applies only to an assessee 'who owns not more than ten goods carriages at any time during the previous year' and computes the deemed profit 'from all the goods carriages owned by him' — vehicles hired in are outside it, and so is the assessee who crosses ten vehicles at any point in the year. Explanation (b) does, however, deem a person in possession under hire purchase or instalments, with amounts still due, to be the owner. Second, unlike s.44AD, s.44AE has KEPT the proviso allowing a firm to deduct salary and interest paid to its partners subject to s.40(b) — the equivalent proviso in s.44AD(2) was omitted from AY 2017-18, and the two sections have been different on this since. Third, s.44AE(5) takes the s.44AE business outside ss.44AA and 44AB and excludes its receipts and income from the monetary limits under those sections, while s.44AE(7) lets an assessee claim lower profits only if he keeps books under s.44AA(2) and gets them audited under s.44AB — and s.44AB clause (c) is the matching audit trigger.
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Section 44AE(1) applies, notwithstanding anything to the contrary in ss.28 to 43C, to an assessee who owns not more than ten goods carriages at any time during the previous year and is engaged in the business of plying, hiring or leasing such goods carriages, and deems the income of that business to be the aggregate of the profits and gains from all the goods carriages owned by him, computed under sub-section (2). Sub-section (2), as substituted with effect from 1 April 2019, fixes the figure for a heavy goods vehicle at one thousand rupees per ton of gross vehicle weight or unladen weight, as the case may be, for every month or part of a month of ownership in the previous year, or the amount claimed to have been actually earned from that vehicle, whichever is higher; and for a goods carriage other than a heavy goods vehicle at seven thousand five hundred rupees for every month or part of a month, or the amount claimed to have been actually earned, whichever is higher. Sub-section (3) forecloses deductions under ss.30 to 38 but its proviso allows a firm to deduct salary and interest paid to its partners subject to the conditions and limits in s.40(b). Sub-section (4) deems written down value to have been computed as if depreciation had been claimed and allowed. Sub-section (5) disapplies ss.44AA and 44AB so far as they relate to the s.44AE business and excludes its gross receipts or income from the monetary limits under those sections. Sub-section (7) permits an assessee to claim lower profits only if he keeps books under s.44AA(2) and gets them audited under s.44AB. The Explanation adopts the meanings of 'goods carriage', 'gross vehicle weight' and 'unladen weight' from s.2 of the Motor Vehicles Act 1988; defines 'heavy goods vehicle' as any goods carriage whose gross vehicle weight exceeds 12,000 kilograms; and deems a person in possession of a goods carriage under hire purchase or instalments, with the whole or part of the amount still due, to be its owner.
Not applicable — statutory provision. The operative rules are that from AY 2019-20 the deemed profit is differentiated — one thousand rupees per tonne per month for a heavy goods vehicle, seven thousand five hundred rupees per month for any other goods carriage, in each case subject to the higher actual earning; that a heavy goods vehicle is one whose gross vehicle weight exceeds 12,000 kilograms; that the scheme is confined to an assessee owning not more than ten goods carriages at any time in the previous year, ownership including hire purchase and instalment possession; and that a firm assessed under s.44AE may still deduct partners' salary and interest within the s.40(b) limits.
Not applicable — statutory provision. What follows is this library's reading of the statutory words and is not authority. Sub-section (1) is keyed to ownership twice over — the ten-vehicle test is 'at any time during the previous year' and the computation is 'from all the goods carriages owned by him' — so a vehicle taken on hire is neither counted for the ceiling nor covered by the deeming. Sub-section (2) makes the deemed figure a floor rather than a fixed sum, because each clause ends 'or an amount claimed to have been actually earned from such vehicle, whichever is higher'. The retention of the proviso to sub-section (3), when the corresponding proviso to s.44AD(2) was omitted with effect from 1 April 2017, is a deliberate difference between the two presumptive schemes and cannot be reasoned away by analogy from s.44AD.
(i) being a heavy goods vehicle, shall be an amount equal to one thousand rupees per ton of gross vehicle weight or unladen weight, as the case may be, for every month or part of a month during which the heavy goods vehicle is owned by the assessee in the previous year or an amount claimed to have been actually earned from such vehicle, whichever is higher;
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Handle my notice → Ask a CA on WhatsAppFor a heavy goods vehicle the deemed profit is one thousand rupees per tonne of gross vehicle weight or unladen weight, as the case may be, for every month or part of a month of ownership, or the amount claimed to have been actually earned from that vehicle, whichever is higher; for every other goods carriage it is seven thousand five hundred rupees a month on the same 'whichever is higher' basis. That differentiated structure, and the definition of a heavy goods vehicle as a goods carriage whose gross vehicle weight exceeds 12,000 kilograms, were substituted into s.44AE by section 16 of the Finance Act 2018 with effect from 1 April 2019 — that is, from AY 2019-20. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 44AE, section 44AA, section 44AA(2), section 44AB, section 40(b), section 44AD of the Income Tax Act 1961. It is reported as Income-tax Act 1961, s.44AE, sub-section (2) and Explanation clauses (a) and (aa) as substituted by section 16 of the Finance Act 2018 with effect from 1 April 2019. Before AY 2019-20 every goods carriage, heavy or not, was at a flat seven thousand five hundred rupees a month, so an order or a computation for AY 2018-19 or earlier that applies the per-tonne rate is applying the wrong law, and one for AY 2019-20 or later that applies the flat rate to a twelve-tonne-plus vehicle understates the deemed profit substantially. Three further points decide most s.44AE disputes. First, the section applies only to an assessee 'who owns not more than ten goods carriages at any time during the previous year' and computes the deemed profit 'from all the goods carriages owned by him' — vehicles hired in are outside it, and so is the assessee who crosses ten vehicles at any point in the year. Explanation (b) does, however, deem a person in possession under hire purchase or instalments, with amounts still due, to be the owner. Second, unlike s.44AD, s.44AE has KEPT the proviso allowing a firm to deduct salary and interest paid to its partners subject to s.40(b) — the equivalent proviso in s.44AD(2) was omitted from AY 2017-18, and the two sections have been different on this since. Third, s.44AE(5) takes the s.44AE business outside ss.44AA and 44AB and excludes its receipts and income from the monetary limits under those sections, while s.44AE(7) lets an assessee claim lower profits only if he keeps books under s.44AA(2) and gets them audited under s.44AB — and s.44AB clause (c) is the matching audit trigger. If it applies to you, the first step is this: Get the registration certificate for each vehicle and record the gross vehicle weight; the per-tonne computation and the twelve-tonne threshold both turn on that figure, not on the vehicle's description in the books.
Section 44AE(1) applies, notwithstanding anything to the contrary in ss.28 to 43C, to an assessee who owns not more than ten goods carriages at any time during the previous year and is engaged in the business of plying, hiring or leasing such goods carriages, and deems the income of that business to be the aggregate of the profits and gains from all the goods carriages owned by him, computed under sub-section (2). Sub-section (2), as substituted with effect from 1 April 2019, fixes the figure for a heavy goods vehicle at one thousand rupees per ton of gross vehicle weight or unladen weight, as the case may be, for every month or part of a month of ownership in the previous year, or the amount claimed to have been actually earned from that vehicle, whichever is higher; and for a goods carriage other than a heavy goods vehicle at seven thousand five hundred rupees for every month or part of a month, or the amount claimed to have been actually earned, whichever is higher. Sub-section (3) forecloses deductions under ss.30 to 38 but its proviso allows a firm to deduct salary and interest paid to its partners subject to the conditions and limits in s.40(b). Sub-section (4) deems written down value to have been computed as if depreciation had been claimed and allowed. Sub-section (5) disapplies ss.44AA and 44AB so far as they relate to the s.44AE business and excludes its gross receipts or income from the monetary limits under those sections. Sub-section (7) permits an assessee to claim lower profits only if he keeps books under s.44AA(2) and gets them audited under s.44AB. The Explanation adopts the meanings of 'goods carriage', 'gross vehicle weight' and 'unladen weight' from s.2 of the Motor Vehicles Act 1988; defines 'heavy goods vehicle' as any goods carriage whose gross vehicle weight exceeds 12,000 kilograms; and deems a person in possession of a goods carriage under hire purchase or instalments, with the whole or part of the amount still due, to be its owner. The matter was decided on 2019-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Not applicable — statutory provision. The operative rules are that from AY 2019-20 the deemed profit is differentiated — one thousand rupees per tonne per month for a heavy goods vehicle, seven thousand five hundred rupees per month for any other goods carriage, in each case subject to the higher actual earning; that a heavy goods vehicle is one whose gross vehicle weight exceeds 12,000 kilograms; that the scheme is confined to an assessee owning not more than ten goods carriages at any time in the previous year, ownership including hire purchase and instalment possession; and that a firm assessed under s.44AE may still deduct partners' salary and interest within the s.40(b) limits.
Not applicable — statutory provision. What follows is this library's reading of the statutory words and is not authority. Sub-section (1) is keyed to ownership twice over — the ten-vehicle test is 'at any time during the previous year' and the computation is 'from all the goods carriages owned by him' — so a vehicle taken on hire is neither counted for the ceiling nor covered by the deeming. Sub-section (2) makes the deemed figure a floor rather than a fixed sum, because each clause ends 'or an amount claimed to have been actually earned from such vehicle, whichever is higher'. The retention of the proviso to sub-section (3), when the corresponding proviso to s.44AD(2) was omitted with effect from 1 April 2017, is a deliberate difference between the two presumptive schemes and cannot be reasoned away by analogy from s.44AD. In the words reproduced by the source cited on this page: "(i) being a heavy goods vehicle, shall be an amount equal to one thousand rupees per ton of gross vehicle weight or unladen weight, as the case may be, for every month or part of a month during which the heavy goods vehicle is owned by the assessee in the previous year or an amount claimed to have been actually earned from such vehicle, whichever is higher;"
It was decided by the CBDT Circulars & Instructions on 2019-04-01 and is reported as Income-tax Act 1961, s.44AE, sub-section (2) and Explanation clauses (a) and (aa) as substituted by section 16 of the Finance Act 2018 with effect from 1 April 2019. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 44AE, section 44AA, section 44AA(2), section 44AB, section 40(b), section 44AD, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Not applicable — statutory provision. The operative rules are that from AY 2019-20 the deemed profit is differentiated — one thousand rupees per tonne per month for a heavy goods vehicle, seven thousand five hundred rupees per month for any other goods carriage, in each case subject to the higher actual earning; that a heavy goods vehicle is one whose gross vehicle weight exceeds 12,000 kilograms; that the scheme is confined to an assessee owning not more than ten goods carriages at any time in the previous year, ownership including hire purchase and instalment possession; and that a firm assessed under s.44AE may still deduct partners' salary and interest within the s.40(b) limits. It arises in Presumptive Taxation & Audit and How Tax Law Is Read matters, on section 44AE, section 44AA, section 44AA(2), section 44AB, section 40(b), section 44AD of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Count vehicles at every point in the year, not at the year end: ownership of an eleventh goods carriage at any time during the previous year takes the whole business out of s.44AE. Compute month by month and count a part of a month as a whole month, and remember the statutory floor is 'whichever is higher' — a vehicle that actually earned more than the deemed figure is taxed on the actual figure. Include hire-purchase and instalment vehicles as owned (Explanation (b)), and exclude vehicles merely taken on hire — expenditure on hired vehicles falls outside s.44AE and is deductible on ordinary principles. If the assessee is a firm, deduct partners' salary and interest under the proviso to s.44AE(3) within the s.40(b) limits — this is the point on which s.44AE and s.44AD differ, and the s.44AE proviso is still on the statute book. Before applying the per-tonne rate, check the assessment year: the flat rate of seven thousand five hundred rupees applied to every goods carriage up to and including AY 2018-19.
Still good law. This is the text of section 44AE as published by the Income Tax Department on its own section page, under the heading 'Special provision for computing profits and gains of business of plying, hiring or leasing goods carriages'. It has been corroborated word for word against five other published versions of the section, against section 16 of the Finance Act 2018 as published, and against the reproduction of the whole section in the ITAT Delhi order in Shakir Ahmad dated 12 October 2022. The e-Gazette has not been read. No check has been made for an amendment after the Finance Act 2018, and the current published text carries no footnote list from which a later amendment could be detected, so the label reflects the text as published and no further. Nothing in this entry states any position under the Income-tax Act 2025. Two things a practitioner should do with that. The rate depends on the gross vehicle weight or unladen weight of each goods carriage, so the distinction between a heavy goods vehicle and every other goods carriage has to be established vehicle by vehicle and month by month from the registration particulars, and not from the fleet as a whole. And the presumptive figure under this section is a floor and not a ceiling: the assessee may declare a higher sum, and where he declares lower he is out of the section altogether and into the ordinary requirements of section 44AA and section 44AB. A reader should check the rate as it stood for his own assessment year, because the section has carried three different structures since 2014. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This entry is statutory text, not a decision. It asserts no holding, no bench and no judge's words; every quoted string in it is statutory text. The value in decided_on, 1 April 2019, is the commencement date fixed by section 16 of the Finance Act 2018 and is not a decision date. The current text is taken from the Income Tax Department's own published text of section 44AE, under the heading 'Special provision for computing profits and gains of business of plying, hiring or leasing goods carriages', and corroborated word for word on five other published versions of the section, and again in the reproduction of the whole section at paragraph 9 of the ITAT Delhi order in Shakir Ahmad dated 12 October 2022. A reader checking the section elsewhere should know what else is in circulation. The oldest published version carries the five thousand and four thousand five hundred rupee figures; four versions published between 2014 and 2017 carry the flat seven thousand five hundred rupee rate. All of those are archived and must not be used to state the current law, and each of them will give a wrong answer for a year from assessment year 2019-20 onwards. The commencement date rests on two independent routes. The version published for 2018 carries the prospective note 'Following sub-section (2) shall be substituted for the existing sub-section (2) of section 44AE by the Finance Act, 2018, w.e.f. 1-4-2019 :'. And section 16 of the Finance Act 2018 as published reads 'In section 44AE of the Income-tax Act, with effect from the 1st day of April, 2019' before substituting sub-section (2) and the Explanation clauses in the same words. The current published text carries no amendment footnote list at all, so no commencement date could be sourced from it; the 2018 version is used here only as legislative history. This library already carries a separate entry on the CBDT clarification of 14 August 2019 about vehicle weight under section 44AE. Nothing in that clarification has been re-read for this entry, and the weight question should be taken there rather than settled from this page. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Not applicable — statutory provision. The operative rules are that from AY 2019-20 the deemed profit is differentiated — one thousand rupees per tonne per month for a heavy goods vehicle, seven thousand five hundred rupees per month for any other goods carriage, in each case subject to the higher actual earning; that a heavy goods vehicle is one whose gross vehicle weight exceeds 12,000 kilograms; that the scheme is confined to an assessee owning not more than ten goods carriages at any time in the previous year, ownership including hire purchase and instalment possession; and that a firm assessed under s.44AE may still deduct partners' salary and interest within the s.40(b) limits.
TaxSphere, “Statutory position — s.44AE: Rs 1,000 per tonne for a heavy goods vehicle from AY 2019-20, Rs 7,500 for every other goods carriage”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-44ae-heavy-goods-vehicle-rate-from-ay-2019-20/ (validity last checked 2026-09-08)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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My client is assessed under s.44AE on his own trucks, but he also hired trucks from the market. The officer has disallowed all the running expenses. Is that right?
My client filed under s.44AD for two years and then declared below eight per cent in the third. What happens to him for the next five years, and does he now have to get audited?
My client wants to file under s.44AD. What turnover can he have, what rate must he declare, and can the firm still deduct partners' salary and interest from the presumptive figure?
We are a foreign company on an approved turnkey power project. We keep books, they are audited, and we recognise revenue on percentage of completion under AS-7. The Assessing Officer has rejected the books under section 145(3) and taxed 10 per cent of our billings under section 44BBB(1). Can he do that?
