How is Section 44AE Calculated?

Another thing worth knowing is that Section 44AE isn't the same as calculating your normal business profit and then deducting every expense.

Under the presumptive scheme, deductions under Sections 30 to 38 are treated as already having been given effect, so you generally don't separately deduct expenses such as depreciation, repairs, insurance, etc.

There is a specific exception for a partnership firm, where salary and interest paid to partners can be deducted subject to the applicable conditions and limits.

Also, if someone wants to declare profits lower than the presumptive amount, there are additional compliance implications. The current ITR instructions state that if profits are lower than the prescribed Section 44AE amount, or the number of vehicles owned at any time exceeds 10, the taxpayer has to move out of the simplified presumptive treatment and comply with the applicable books/audit requirements.

So I'd calculate each vehicle separately first and then add them together.

The heavy-vehicle calculation was what confused me too.

A heavy goods vehicle is treated differently. The Income Tax Department's current guidance defines a heavy goods vehicle for this purpose as a goods carriage with gross vehicle weight exceeding 12,000 kg. The presumptive income is ₹1,000 per ton of gross vehicle weight for each month or part of a month during which the vehicle is owned.

So, for example, suppose a truck has a gross vehicle weight of 16 MT and is owned for 12 months.

The basic calculation would be:

16 MT × ₹1,000 × 12 = ₹1,92,000

If the actual income claimed for that vehicle is higher than ₹1,92,000, the higher amount is considered.

For an ordinary goods vehicle, the calculation doesn't use tonnage. It is ₹7,500 per month.

One thing I would double-check is the vehicle documents, especially the RC and the gross vehicle weight, rather than guessing whether the vehicle is "heavy" based on its size.

I used Section 44AE for a small transport business a couple of years ago, and the basic calculation is much simpler than calculating actual profit from the books.

For a goods carriage other than a heavy goods vehicle, the current presumptive amount is ₹7,500 per month for each vehicle. For a heavy goods vehicle, the calculation is ₹1,000 per ton of gross vehicle weight per month. The actual income claimed can be higher than the presumptive amount, in which case the higher amount is considered.

For example, if you have two ordinary goods vehicles for 12 months:

₹7,500 × 12 × 2 = ₹1,80,000 presumptive income.

If one vehicle is sold during the year and was owned for only six months, you calculate using the applicable six-month period.

The important thing is not to confuse the vehicle's actual revenue with the presumptive income. Section 44AE provides a deemed business-income calculation.

Also, the scheme has a vehicle limit. You cannot simply have any number of trucks and use Section 44AE. The law refers to owning not more than 10 goods carriages at any time during the previous year. 

I have 20 goods-carrying vehicles. Am I eligible for presumptive taxation under section 44AE? 

Heavy goods vehicles are the vehicles that carry goods of weigh of more than 12,000 Kg, and light goods vehicles are those vehicles that carry weights up to 12,000 kg.