What is Income Tax Presumptive Taxation Scheme?
The Presumptive Income Tax Scheme is a different tax scheme for individuals, Hindu Undivided Families (HUFs), and partnerships that are engaged in certain eligible business activities. The earnings are based on an assumed position plus a turnover rate, such as sales receipts, instead of calculating bona fide profit before other deductions are made. The purpose of the entitlement is to provide relief in complying with complicated record-keeping and tax calculations.
The presumptive taxation scheme applies to taxpayers who are involved in certain eligible businesses and professions such as goods transportation, professionals, and small businesses with a total turnover of up to Rs.2 crore. The statutory income comes to 6% of the goods transport sector, 8% of non-transport operations, and 50% of the specified vocations, respectively. Only the income to be presumed higher or the actual income, whichever comes out better, has to be taxed. No books of accounts and audits are needed for the taxpayers who choose this option.
Tax burden by presumption offers the taxpayers a breath of relief as they do not need to diarize their individual transactions and keep the books of account. On the other hand, it also contributes to the crusade for voluntary taxpayers and increases the tax base. Nevertheless, it is necessary that a taxpayer determine if it is advantageous for him or her to choose the scheme depending on his or her business model and actual income. By this way of thinking, reducing compliance and administrative burden is both for taxpayers and tax authorities. Primarily, it intends to accomplish this goal by scaling up small businesses in the nation.
