In order to bring the small taxpayers, who earlier didn’t pay taxes and don’t have the resources to maintain the books of accounts, into the income tax net can opt for the Presumptive Taxation Scheme. Under this scheme, a fixed percentage of accrued gross receipts is considered as the income and is also chargeable to tax. This scheme earlier was applied to an assessee running a business of civil construction or supply of labor for civil construction only.

Presumptive Income has been provided for under Sections:

(1) 44AD(for eligible businesses)

(2) 44ADA(professionals)

(3) 44AE(businesses plying, hiring or leasing goods carriages)

Under this scheme, income is thus presumed, which is known as Presumptive Income . It is income which is calculated at a flat rate of 8% or 50% of the gross receipts which are  for eligible businesses and the professionals respectively. This income is presumed and it is not the actual income. The actual income would be gross receipts minus business expenses. But the presumed income treats the expenses and other deductions as already deducted.

Common Features:

(1) No deductions will be allowed.

(2) The depreciated value of any asset which is used for business purpose will be deemed to have been calculated as if the assesse  had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.

Under Section 44AD:

Eligible Assessees:

  1. Resident Individual
  2. Resident Hindu Undivided Family(HUF)
  3. Resident Partnership firm (not including Limited Liability Partnership)

Eligible Businesses:

  1. Any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE; and
  2. Whose turnover or gross receipts in the previous year does not exceed an amount of Rs.2 crores.

Will Not apply to:

(1)  a person earning income in the nature of commission or brokerage; or

(2) a person carrying on any agency business.


Will be calculated at 8% of Turnover or gross receipts.

Under Section 44ADA:

Eligible Assessees:


Film Artist (editor, singer, lyricist, story writer, screen play writer, dialogue writer and dress designer, actor, cameraman, director, music director, art director, dance director) Legal, or the profession of Accountancy or Technical Consultancy or Medical, Engineering or Architectural profession or Interior Decoration, profession of Company Secretary, profession of Information Technology and whose gross receipts do not exceed Rs. 2 crores.


Will be calculated at 50% of Total gross receipts

Under Section 44AE:

Eligible Assessees:

An assessee, who owns not more than ten goods carriages who is engaged in the business of plying, hiring or leasing such goods carriages:

(i) In case of a heavy goods vehicle, depreciation up to Rs.5000/-  will be allowed. This Rs.5000/-;

(ii) In case of vehicles other than heavy goods vehicles, depreciation will be allowed for an amount up to Rs.4500/-.

These amounts of Rs.5000/- or Rs.4500/- will be allowed for every month or for that part of the month during which the vehicle, in the previous year, is owned by the assessee or an amount actually earned from such vehicle, whichever is higher.


ITR-4Sugam is the form to file Income Tax Return which is applicable only to individuals, Hindu Undivided Family, small business taxpayers and professionals deriving their income from business which has presumptive income under section 44AD, 44ADA and 44AE.

The form can be filed online at the income tax website through the account login using income tax return filing online portal or it can be filed offline by downloading the form in Excel or Java Utility, filling it and uploading it to the website. It is a simple and clear, easily understandable form.

File income tax return online with the help of Tax Experts at File ITR Online.

Related Post: How to get Tax refunds in just 7-10 days through E-filling?

What is Presumptive Income? How To File Presumptive Income in FORM 4S?
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