Question 3 OR (a)
Presumptive income from goods carriages
12 marks
- Time to write
- About 24 minutes
- Notes
- Crux notes
Question
Question 3 OR (a) · 12 marksMr. X own a business of goods carriage. For the tax year 2026-27 he furnishes the following data.
| Particulars (on 01/04/2026 | Heavy goods vehicle | Light goods vehicle |
|---|---|---|
| Number | 5 | 3 |
| Description of weightage | 16 ton | 6 ton |
In the tax year he sold a heavy goods vehicle (truck) on 23/5/2026, and on 17/7/2026 he bought another truck of the same capacity. He purchased a light goods vehicle (truck) with a capacity of 6 tons on 10/10/2026.
Other information relevant for the year 2026-27 is given below.
| Expenditure | Amount | Receipts | Amount |
|---|---|---|---|
| Expenses, operational | 625000 | Charges for freight | 1280000 |
| Expenses, office | 25000 | Deposits, interest on (gross) | 200000 |
| Depreciation | 165000 | ||
| Expenses, general | 40600 | ||
| Profit | 624400 | ||
| Total | 1480000 | Total | 1480000 |
Mr. X wished to compute his income under the head business or profession under the presumptive income scheme i.e., 44AE. Under section 44AE, you are required to compute his business income. (12)
Paper note: Set under the Income-tax Act, 1961 for assessment year 2024-25 (previous year 2023-24); answered under the Income-tax Act, 2025 for tax year 2026-27, so the year term moves forward by 3 years and every date in the question moves forward by the same 3 years, so that intervals, holding periods and ages are as printed. Every figure and name is as printed. The question names section 44AE of the Income-tax Act, 1961; the answer applies the corresponding provision of the Income-tax Act, 2025. Every date moves by three years, so the months each vehicle is owned are as printed.
Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- computeHead by head: each income under its head, exempt items marked exempt, then the deductions and the tax.
Write it in this order
- Read the data; note exactly what is asked 2 min
- 1 Eligibility not more than ten goods carriages; heavy and light vehicles 2 marks 3 min
- 2 Months of ownership of each vehicle 3 marks 5 min
- 3 Presumptive income computed 4 marks 7 min
- 4 Business income as the higher amount; treatment of interest 2 marks 3 min
- 5 Notes 1 mark 2 min
- Check: arithmetic, units (₹, %), final answer underlined 2 min
Try it first. About 24 minutes for 12 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Eligibility (section 58(2), Table: Sl. No. 2, formerly section 44AE)
The scheme is open to an assessee owning no more than ten goods carriages at any point in the tax year. Mr. X owns 5 heavy and 3 light goods vehicles at the start of the year, 4 heavy after the sale on 23/5/2026, 5 heavy again from 17/7/2026, and 4 light from 10/10/2026: at most 5 + 4 = 9 at any time. He is eligible.
A heavy goods vehicle is one whose gross vehicle weight exceeds 12,000 kg (section 58(11)(e)); the 16-ton trucks are heavy and the 6-ton trucks are light.
Months of ownership (a part of a month counts as a full month)
| Vehicle | Weight | Owned | Months |
|---|---|---|---|
| 4 heavy goods vehicles held all year | 16 ton each | 1/4/2026 to 31/3/2027 | 12 |
| Heavy goods vehicle sold on 23/5/2026 | 16 ton | April and May | 2 |
| Heavy goods vehicle bought on 17/7/2026 | 16 ton | July to March | 9 |
| 3 light goods vehicles held all year | 6 ton each | 1/4/2026 to 31/3/2027 | 12 |
| Light goods vehicle bought on 10/10/2026 | 6 ton | October to March | 6 |
Computation of presumptive income
| Particulars | Working | Rs. |
|---|---|---|
| Heavy goods vehicles held all year | 4 × 16 tons × ₹1,000 × 12 months | 7,68,000 |
| Heavy goods vehicle sold | 1 × 16 tons × ₹1,000 × 2 months | 32,000 |
| Heavy goods vehicle bought | 1 × 16 tons × ₹1,000 × 9 months | 1,44,000 |
| Light goods vehicles held all year | 3 × ₹7,500 × 12 months | 2,70,000 |
| Light goods vehicle bought | 1 × ₹7,500 × 6 months | 45,000 |
| Presumptive income from goods carriages | 12,59,000 |
Under the scheme the business income is the higher of the presumptive income and the profit the assessee claims to have actually earned. The profit from goods carriage shown in the accounts is the net profit of ₹6,24,400 less the interest on deposits of ₹2,00,000, which is not business income: ₹4,24,400. The presumptive income of ₹12,59,000 is higher.
Income under the head Profits and gains of business or profession = ₹12,59,000.
- The interest on deposits of ₹2,00,000 is taxed separately under the head Income from other sources.
- No deduction for operational, office or general expenses or depreciation is allowed against the presumptive income (section 58(4)); the written down value of the vehicles is computed as if depreciation had been allowed (section 58(6)).
- Mr. X need not keep books of account or get them audited for this business (section 58(10)).
Where the 12 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Eligibility (not more than ten goods carriages; heavy and light vehicles) | 2 |
| 2 | Months of ownership of each vehicle | 3 |
| 3 | Presumptive income computed | 4 |
| 4 | Business income as the higher amount; treatment of interest | 2 |
| 5 | Notes | 1 |
| Total | 12 |
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