Understanding Presumptive Taxation: Section 44AE for Transporters
Introduction
Managing tax compliance can be a challenge for small transporters. If you operate a goods carriage business and want to avoid complex accounting and audits, Section 44AE of the Income Tax Act might be your best friend.
At Makwana Sweta & Associates, a trusted firm for CA services in Mumbai, we’ve helped hundreds of small transport business owners legally reduce tax hassles by opting for presumptive taxation under Section 44AE.
In this article, we break down the provision in simple terms, keeping it updated for Assessment Year 2025–26.
What Is Section 44AE?
Section 44AE is a part of India’s presumptive taxation scheme aimed at simplifying the income tax process for small transporters. It allows eligible taxpayers to declare income at a fixed per-vehicle rate, thereby avoiding the need for detailed books of accounts and audits.
Instead of calculating actual profits and expenses, income is presumed based on the number of commercial vehicles owned.
Who Can Opt for Section 44AE?
You can opt for Section 44AE if:
- You own no more than 10 goods vehicles at any time during the financial year
- The vehicles are used for transporting goods
- You are an individual, HUF, partnership firm, or resident company (excluding LLPs)
This section is not applicable for businesses involved in passenger transport or leasing vehicles.
Presumptive Income Calculation under Section 44AE
For AY 2025–26, the income will be calculated as follows:
| Vehicle Type | Presumed Income Per Month Per Vehicle | Annual (12 months) |
|---|---|---|
| Heavy Goods Vehicle | ₹1,000 per ton of gross vehicle weight | ₹12,000 per ton |
| Other Goods Vehicle | ₹7,500 per vehicle | ₹90,000 per vehicle |
For example, if you own:
- 3 small goods vehicles → ₹7,500 x 3 x 12 = ₹2,70,000 income
- 1 heavy goods vehicle (gross weight 15 tons) → ₹1,000 x 15 x 12 = ₹1,80,000
Total income = ₹4,50,000 (to be declared in ITR)
Key Benefits of Section 44AE
- No Audit Required
You’re exempted from tax audit under Section 44AB. - No Need to Maintain Books
Income is presumed, so you’re not required to maintain detailed books of accounts. - Fixed Tax Liability
Knowing your income in advance makes tax planning easier and transparent. - Lower Compliance Burden
Filing becomes faster and more affordable, especially with guidance from a Chartered Accountant in Mumbai.
Tax Filing Process under Section 44AE
Here’s a quick step-by-step process:
- Ensure eligibility – Own ≤10 goods vehicles during the year
- Compute income – Based on the type and number of vehicles
- File ITR-4 – For presumptive taxpayers (under Section 44AE)
- Pay advance tax – If your total tax liability exceeds ₹10,000 in a financial year
- Avoid deductions – No other business expenses can be claimed against this income
Important Notes
- You cannot claim depreciation or other business expenses
- Deductions under Chapter VI-A (80C to 80U) can still be availed
- TDS applicability on payments received still remains
- Vehicles not owned by you but used in your business are excluded
Who Should Avoid Section 44AE?
Section 44AE may not be suitable for you if:
- You run a large fleet (more than 10 vehicles)
- Your actual income is significantly lower than the presumptive figures
- You want to claim high business-related deductions (fuel, repair, interest)
In such cases, it might be more beneficial to maintain proper books and file under normal provisions.
FAQs on Section 44AE (Updated for FY 2024–25)
Q1. Can I opt out of Section 44AE in a later year?
Yes. However, frequent switches between presumptive and regular schemes are discouraged.
Q2. Can I claim loss under Section 44AE?
No, losses cannot be claimed or carried forward under Section 44AE.
Q3. Can a transporter with owned and hired vehicles use Section 44AE?
Only owned vehicles are considered for presumptive income.
Common Mistakes to Avoid
- Counting hired/leased vehicles as “owned”
- Declaring fewer vehicles to reduce taxable income
- Not filing ITR-4 properly
- Ignoring advance tax liabilities
Avoiding these mistakes ensures full legal compliance and smooth business operations.
Final Thoughts
For small transporters, Section 44AE offers a simplified route to tax compliance. It minimizes paperwork, ensures predictability, and cuts down on audit stress. With the guidance of a professional like CA Sweta Makwana, you can make the most of this provision while staying 100% compliant.
Looking for professional assistance? Contact Makwana Sweta & Associates, your trusted Tax Consultants in Mumbai and across India. Our team specializes in Chartered Accountant Services for transport businesses.