Compared to major companies that conduct huge numbers of sales and purchases transactions, small businesses and shop owners have a smaller number of clients. As opposed to the companies and LLPs of large corporations, these businesses are typically run as proprietary concerns or partnership firms. According to information in the public domain, there are 60 million of these mom-and-pop shops in India. In contrast to the complicated transactions and accounting of large firms, the primary transactions of small businesses are the sales and acquisitions of commodities and the upkeep of shops or premises.
In light of this, the Income-tax Act has made it clear that small firms are not required to keep books of accounts or have them audited by a certified chartered accountant.
These companies can file their returns as long as they estimate their taxable profits/income to be at or over a specific threshold for income tax purposes. Income tax officials are unable to question them about their books of account because they are not compelled to keep them up to date or have them audited. A Presumptive Taxation Arrangement is the name given to this scheme. This Presumptive Taxation Scheme (PTS) is designed for small firms and professionals who fall under the Income-tax Act’s definition of those categories.
- What are the PTS for small enterprises’ major features?
- Small enterprises, including those in manufacturing, contracting, and trading, can use the PTS.
- PTS, a different programme, is available for small goods movers.
- For small professions, a different plan called PTS exists.
- Life insurance brokers, commission/brokerage firms, and other entities cannot use the PTS.
- No more than 2 crores should be made in sales overall
- Only resident taxpayers, not non-resident taxpayers, are eligible to use the programme.
- The scheme is exclusively available to individuals, HUFs, and partnership firms; companies and LLPs are not eligible.
- Once you have claimed PTS, you are no longer able to claim business deductions under sections 10, 10A, 10AA, 80IB, etc.
How is the PTS income determined?
Calculate the business’s income from sales or gross receipts; if the total sales turnover is less than $2 crore, you are entitled to receive PTS. then determine the company’s profits at an 8% rate in the event
Then, if you received payment in cash for the sale, calculate the business earnings at an 8% percent.
If you got payment for a transaction in a form other than cash, you should then calculate your business’ earnings at a rate of 6% of sales.
total the revenue generated by both operating modes.
This is your take-home pay from your business.
For businesses, you can subtract the partner’s compensation from this to get net business income, and for individuals, this is net business income.
How is fixed asset depreciation permitted?
Although depreciation cannot be claimed against such presumed company income, the assets are evaluated at year’s end as though it were permitted. For instance, if your gross receipts for the fiscal year 2019–20 are Rs. 1,80,00,000 and your presumed income is calculated at Rs. 12,00,000 as in the example above. If you own a building worth Rs. 50,00,000 that you use for your business but on which you can claim depreciation, then no depreciation is permitted; instead, the written-down value of the building at the start of the following fiscal year must be Rs. 45,00,000 (by 10% less than the actual original value).
What time must the taxes be paid?
One of the main benefits of PTS is that advance tax is NOT required to be paid in full with each instalment as per the quarterly due dates. Only one instalment, or the final quarter of the fiscal year, due on March 15, may be used to pay the entire tax.
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