Presumptive Taxation Scheme(PTS) - All You Need To Know

Who can opt for PTS?
The scheme can be adopted by eligible resident individuals, resident Hindu Undivided Families (HUFs) and resident partnership firms. Besides, only specified professionals can opt for this scheme, such as lawyers, doctors, engineer, architect, accountant, technical consultant, interior designers and any other profession as notified by CBDT.

“A person adopting PTS can declare income at a prescribed rate and, in turn, is relieved from the job of maintaining books of account,” said Suresh Surana, founder, RSM Astute Consulting Group, a chartered accountancy firm.

Also, there are restrictions based on the turnover, receipts and nature of business and profession for opting PTS. For instance, only businesses with an annual turnover of less than ₹2 crore can opt for PTS. Similarly, a professional having total receipts below ₹50 lakh in a year and a person who owns not more than 10 goods carriages and is engaged in the business of plying, hiring or leasing such goods carriages can opt for PTS .

Who can’t?
Limited liability partnership (LLP) firms and those businesses which claim benefits for being in free or special economic zones (SEZs) or in backward areas can’t avail of PTS. Even those who are earning income in the nature of commission or brokerage (such as insurance agents or mutual fund advisers) can’t opt for the scheme.

How to calculate tax?
Those who are eligible to opt for PTS need to calculate their earnings based on presumptive basis. Net income is estimated to be 8% or 6% (in case of digital receipts) of gross turnover (for businesses) or ₹7,500 per month for each vehicle where the tax payer plies, leases or hires trucks or 50% of the total gross receipts for the year in case of professionals
For instance, if a businessman opts for PTS and declares the total turnover of the business at ₹1.5 crore in a financial year, business income chargeable to tax so calculated would be ₹12 lakh (8% of ₹1.5 crore). However, if half of the turnover or business income is considered to be received not in cash but through like cheque, draft or online payment, then income can be declared at 6% on that part of the turnover. In the above example, business income chargeable to tax so calculated would be ₹10.5 lakh (6% on ₹75 lakh or half the turnover and 8% on the other half of ₹75 lakh). Assessees are also allowed to willingly declare income at a higher rate than the minimum prescribed rate