Different head, different rules: Income from hiring out trucks, lorries, buses or other vehicles used for transporting goods or passengers is generally treated as income from business, since it involves an active commercial activity (maintaining the vehicle, arranging drivers, fuel, permits, and securing hiring contracts), unlike passive rental of immovable property which falls under Income from House Property. This distinction matters because the computation rules, the availability of presumptive taxation, and the treatment of related expenses (depreciation, fuel, driver salaries, maintenance, loan interest) all follow the business income framework.
The Presumptive Scheme for Goods Carriages: Section 44AE
For an individual, HUF, firm or other eligible assessee who owns not more than a specified number of goods carriages (trucks/lorries) at any time during the year, a presumptive taxation scheme allows income to be computed on a per-vehicle, per-month basis (a prescribed amount for heavy goods vehicles and a different prescribed amount for other goods carriages), without needing to maintain detailed books of account or compute actual profit, provided the eligibility conditions (including the cap on the number of vehicles owned) are met.
Worked Example
An owner of three trucks under the presumptive schemeMr Yadav owns three medium goods vehicles, which he hires out to a logistics company; the trucks are driven by drivers he employs, and he handles maintenance and fuel costs himself, receiving a fixed monthly hire amount from the logistics company. Since Mr Yadav owns only three goods carriages (within the limit for the presumptive scheme), he can opt to compute his income under the presumptive provisions for goods carriages, declaring income based on the prescribed per-vehicle, per-month amount for each truck for the months he owned them during the year, rather than maintaining detailed accounts of his actual hire receipts, fuel costs, driver salaries, and depreciation. This presumptive income is then taxed under the head business income, with no separate deduction for expenses allowed beyond what is already factored into the prescribed presumptive amount (other than specific items like partner's remuneration/interest for a firm, where applicable).
What If You Exceed the Vehicle Limit?
If the number of goods carriages owned exceeds the threshold for the presumptive scheme, the income needs to be computed under the regular provisions for business income, meaning actual receipts less actual expenses (fuel, driver wages, maintenance, insurance, depreciation on the vehicles, loan interest if vehicles are financed), with the usual books of account and, depending on turnover, potential tax audit requirements.
Depreciation on Commercial Vehicles
Where income is computed under the regular provisions (not presumptive), depreciation on commercial vehicles used in this hiring business can be claimed following the block of assets rules, with commercial vehicles often eligible for the rates applicable to motor vehicles used in a business of running them on hire, which can differ from the rate for vehicles used for the owner's own business purposes.
GST Considerations
Hiring out goods transport vehicles may have its own GST treatment (transport of goods by road services have specific GST provisions, including in some cases a reverse-charge mechanism where the recipient of the service pays GST), which is a separate compliance matter from the income tax treatment of the hire income discussed here.
Frequently Asked Questions
Does the Section 44AE presumptive scheme apply to renting out passenger vehicles like cars or buses, or only goods carriages? ▼
Section 44AE is specifically framed around 'goods carriages' (vehicles used for transporting goods, such as trucks and lorries). Income from hiring out passenger vehicles (cars, buses) would generally need to be evaluated under the general business income provisions or other applicable presumptive schemes (such as those for businesses generally), rather than this goods-carriage-specific scheme, depending on the nature and scale of the activity.
If I opt for the presumptive scheme one year, can I switch back to regular computation (actual income and expenses) in a later year? ▼
The presumptive schemes generally come with conditions around switching between presumptive and regular computation, including, in some cases, restrictions on reverting to presumptive taxation for a number of years after opting out, or requirements for maintaining books and audit if income declared is below the presumptive level in certain circumstances. The specific conditions applicable to switching should be checked before making a change.
Can I claim depreciation on my trucks separately if I am using the Section 44AE presumptive scheme? ▼
Under the presumptive scheme for goods carriages, the income computed on the prescribed per-vehicle basis is generally considered to already account for normal business deductions, including depreciation, meaning a separate depreciation claim is generally not available in addition to the presumptive income figure. However, for the purpose of computing the written-down value of the vehicle for any future year (such as a year the vehicle is sold, or a year the presumptive scheme is not opted for), depreciation is deemed to have been allowed during the years the presumptive scheme was used, which can affect the cost basis for a later sale.