Presumptive income limit increased for vehicle operators

Budget 2014 has lot of forward looking amendments aimed at simplifications and clarifications for the taxpayers at large. There are also certain amendments to back the tax administration by nullifying decisions rendered by appellate authorities. However, the homework done by the tax department is laudable for the reason that it is in the right direction to provide the hassle-free tax compliance in the days to come.
One of the amendments proposed in the Finance Bill, 2014 relates to upward revision of presumptive tax payable by taxpayers under section 44AE. Amendment to this provision is due and previously it was amended by the Finance (No.2) Act, 2009.
Budget 2014
The Budget 2014 proposes for enhancement of presumptive income which is tabulated as under:
Existing
Proposed
For each heavy goods vehicle (HGV) owned by the assessee for every month or part of a month, presumptive income at Rs.5,000 per month per vehicle


For each goods carriage owned by the assessee for every month or part of a month, presumptive income at Rs.7,500 per month per vehicle.
For each vehicle other than heavy goods vehicle owned by the assessee for every month or part of a month, presumptive income at Rs.4,500 per month per vehicle.


 Features of section 44AE
The following are the features of this provision:
    Any assessee who owns not more than 10 goods carriages at any time during the previous year is eligible to opt for this provision.
    Such assessee must be engaged in the business of plying, hiring or leasing of such goods carriages in order to be eligible for avail this section.
    Assessees such as individuals, HUFs, firms, AOPs could avail this provision.
    The presumptive income offered under this section will deem that all deductions as applicable are allowed except section 40(b).
    In the case of firms, on this presumptive income deduction such as working partner salary and interest on capital subject to the conditions and limits specified in section 40(b), could be claimed.
    An assessee opting for this provision need not maintain books of account mandated by section 44AA. Thus no penalty could be levied under section 271A.
    Even if gross receipt exceeds the limit prescribed for audit under section 44AB i.e Rs.100 lakhs it is not required to be done. Therefore no penalty under section 271B is exigible.
    The Finance Bill, 2014 proposes a change by increasing the presumptive income at Rs.7,500 per month or part of a month for which the vehicle was owned by the assessee.
    The Finance Bill, 2014 proposes to dispense with the system of identifying heavy goods vehicle or light commercial vehicle (LCV). It provides for uniform presumptive income in respect of vehicles used in the business of plying, hiring or leasing of such goods carriages.
What more could be done?
The change proposed in section 44AE is very simple. It has proposed for upward revision of presumptive income from Rs.5000 per month for heavy goods carriages and Rs.4500 per month for other goods carriages by a uniform adoption of Rs.7,500 per month for any goods carriages from the assessment year 2015-16 onwards.

The lawmakers could have inserted an Explanation to the provision to say that the taxpayers are eligible to claim depreciation (being non-cash expenditure) as eligible for cash flow source. This would have provided clarity and enabled the taxpayers to claim the same as a source for any investment which they may do out of such business income
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