Section 44AE

Section 44AE — the law in short

What the courts have decided on section 44AE, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Nitin Soni High CourtHelps taxpayer
  I returned income for my trucks under s.44AE. The officer says my real income was higher and has taxed the difference. Can he?
  No, not on the facts of this case. The High Court held that the words 'shall be deemed' in s.44AE indicate a legislative intent that tax is chargeable on the presumptive income computed under sub-section (2). The presumptive income, which may be less or more than the truth, is what is taxable; such an assessee is not required to maintain books at all; and so even where the actual income in a given case is more than the figure computed under sub-section (2), it cannot be taxed. The addition of Rs 29,21,738 made under the head income from other sources was deleted, and the Revenue's appeal was dismissed summarily. Two limits matter. The officer had identified no other source in the assessment order, and it was not disputed that s.44AE applied. A genuinely separate source of income remains taxable in the ordinary way.
• Shakir Ahmad v ITO — s.44AE covers only the goods carriages the assessee owns, so expenditure on hired vehicles remains deductible ITATHelps taxpayerNo later treatment found
  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?
  No. Section 44AE applies to an assessee who owns not more than ten goods carriages and deems the income from all the goods carriages owned by him; receipts relating to owned goods carriages are subject to the section, but vehicles taken on hire are outside it. The Delhi Bench directed the Assessing Officer to allow the deduction of expenditure relating to goods carriages not owned by the assessee but taken on hire from the open market for carrying out the transportation activities.
• National Transport Company v ITO — the s.44AE presumptive rates used as the yardstick for an estimate after books were rejected ITATHelps departmentNo later treatment found
  My client's books have been rejected and the officer has estimated a per-vehicle profit. How does the Tribunal test whether that estimate is reasonable?
  By comparing it with the presumptive figures Parliament itself has fixed. The Delhi Bench upheld an estimate of Rs 50,000 per tanker per annum, about Rs 4,000 a month, on the footing that under the presumptive scheme in s.44AE the monthly income for a heavy vehicle was Rs 5,000 and for other goods carriages Rs 4,500, so the estimate was not based on irrational parameters, and it dismissed the appeal.
• Statutory position — s.194C: one per cent for an individual or HUF and two per cent for everyone else, the thirty thousand and one lakh thresholds, and the material-bought-from-a-third-party carve-out that takes a contract outside "work" CBDT Circulars & InstructionsCuts both ways
  I pay a fabricator to make parts to my drawings and I pay lorry owners to move my goods. Do I deduct under section 194C, at what rate, and at what figure does the obligation start — is it thirty thousand rupees or one lakh?
  Both figures are live and they do different jobs. Section 194C(5) says no deduction is to be made where the single sum credited or paid does not exceed thirty thousand rupees, and its proviso says that once the aggregate of such sums in the financial year exceeds one lakh rupees you must deduct under the section anyway. So a single bill of Rs 35,000 is caught on its own, and a run of Rs 12,000 bills is caught the moment the year's total passes Rs 1,00,000. The rate is one per cent where the payee is an individual or a Hindu undivided family and two per cent in every other case. Whether the fabrication is "work" at all depends on whose material is used: manufacturing to your specification out of material bought from you (or from an associate of yours) is "work"; the same job done out of material the fabricator bought from anyone else is expressly excluded, and that exclusion is the line between section 194C and a contract for sale. All of this is the 1961 Act, which the CBDT's own transition FAQ says stands repealed on 1 April 2026: for a credit or payment on or after that date the corresponding provision is section 393(1) of the Income-tax Act, 2025, which carries the same rates and the same two figures.
• Statutory position — s.44AD(1) and (2): the eight and six per cent rates, the Rs 2 crore / Rs 3 crore ceiling, and the partner's-salary proviso that was omitted CBDT Circulars & InstructionsCuts both ways
  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?
  Eight per cent of turnover, or six per cent of so much of the turnover as is received by account payee cheque, account payee bank draft, electronic clearing system or other prescribed electronic mode during the previous year or before the s.139(1) due date. The eligible-business ceiling is two crore rupees, replaced by three crore rupees where cash receipts do not exceed five per cent of turnover (Finance Act 2023, from AY 2024-25) — and the proviso that once let a firm deduct partners' salary and interest from the s.44AD figure was omitted by the Finance Act 2016 with effect from 1 April 2017, so it is not available for AY 2017-18 or any later year.
• CBDT Clarification 14.08.2019 on s.44AE CBDT Circulars & InstructionsHelps departmentJudgment not reachable
  For 44AE, do I compute on gross vehicle weight or on unladen weight for a heavy goods vehicle?
  Gross vehicle weight. For a heavy goods vehicle — gross vehicle weight exceeding 12,000 kg — presumptive income is Rs. 1,000 per ton of gross vehicle weight as defined in the Motor Vehicles Act, 1988, for every month or part of a month. Unladen weight is the measure only for a tractor or a road-roller; other goods carriages remain at Rs. 7,500 per month or part of a month.
• 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 CBDT Circulars & InstructionsCuts both ways
  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.
• Statutory position — s.44AA(2): who must keep books of account, and the thresholds CBDT Circulars & InstructionsCuts both waysNo later treatment found
  My client runs a small business, not a notified profession. At what point is he obliged to keep books at all, and what are the current figures?
  For a business or a non-specified profession, books must be kept if income from the business or profession exceeds Rs 1,20,000 OR total sales, turnover or gross receipts exceed Rs 10,00,000 in any one of the three years immediately preceding the previous year. For an individual or a Hindu undivided family two provisos raise those figures to Rs 2,50,000 and Rs 25,00,000 respectively.
• Income Tax Dept presumptive taxation tutorial CBDT Circulars & InstructionsCuts both ways
  What are the current 44AD, 44ADA and 44AB limits, and what does the 5% cash test mean?
  For AY 2024-25 onwards: s.44AD applies up to Rs. 2 crore turnover, or Rs. 3 crore where cash receipts are within 5%, at 8% (6% for receipts by account payee cheque or draft or electronic mode); s.44ADA up to Rs. 50 lakh, or Rs. 75 lakh on the same condition, at 50%. Audit under s.44AB is triggered at Rs. 1 crore turnover for business, Rs. 10 crore where cash receipts and cash payments are each within 5%, and Rs. 50 lakh gross receipts for a profession. The 5% cash cap is the same thing as routing more than 95% of transactions through banking channels.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.