A Beginner’s Guide to PGBP Income Tax Scheme for Small Business and Professionals

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The government of India has introduced various provisions for the convenience of taxpayers to reduce the complexities of income tax compliance. One such scheme is the Presumptive Taxation Scheme for Business Professionals (PGPB), which was introduced to make tax compliance simpler for small taxpayers. In this blog, we will discuss the provisions of the PGBP scheme and its applicability.

What is PGBP?

Presumptive Taxation Scheme for Business Professionals (PGPB) is a scheme introduced by the government to simplify tax compliance for small taxpayers. Under this scheme, taxpayers engaged in a profession or small businesses can declare their income based on certain presumptions, instead of maintaining detailed books of accounts.

Applicability of PGBP Scheme

The PGBP scheme is applicable to individuals, Hindu Undivided Families (HUFs), and partnership firms engaged in a profession or small businesses whose total turnover or gross receipts do not exceed Rs. 2 crores in a financial year.

Benefits of PGBP Scheme

The PGBP scheme provides several benefits to small taxpayers, including:

  1. Reduced Compliance Burden: Taxpayers under the PGBP scheme are not required to maintain detailed books of accounts, which reduces their compliance burden.
  2. Lower Tax Liability: Taxpayers under the PGBP scheme are required to pay tax on a presumptive basis, which is usually lower than the tax liability calculated under the normal provisions of the Income Tax Act.
  3. Easy Filing of Income Tax Returns: Taxpayers under the PGBP scheme can easily file their income tax returns using ITR-4 form, which is a simplified return form.

Presumptive Income under PGBP Scheme

Under the PGBP scheme, taxpayers are required to declare their income based on certain presumptions. The presumptive income for different categories of taxpayers is as follows:

  1. Professionals: Professionals are required to declare their income at 50% of their gross receipts.
  2. Small Businesses: Small businesses are required to declare their income at 8% of their gross receipts.

Conditions for Availing PGBP Scheme

Taxpayers availing of the PGBP scheme must fulfill the following conditions:

  1. Maintain Proper Books of Accounts: Taxpayers must maintain proper books of accounts, including a cash book, a ledger, and a statement of stock-in-trade.
  2. Declare Income at Presumptive Rate: Taxpayers must declare their income at the presumptive rate applicable to their profession or business.
  3. File Income Tax Returns: Taxpayers must file their income tax returns on or before the due date.

Frequently Asked Questions (FAQs)

Q.What is the full form of PGBP income tax scheme?

The full form of PGBP income tax scheme is “Presumptive Taxation Scheme for Business Professionals”.

Q.Who can avail of the PGBP income tax scheme?

Individuals, Hindu Undivided Families (HUFs), and partnership firms engaged in a profession or small business whose total turnover or gross receipts do not exceed Rs. 2 crores in a financial year can avail of the PGBP income tax scheme.

Q.What is the benefit of availing of the PGBP income tax scheme?

The PGBP income tax scheme reduces the compliance burden for small taxpayers engaged in a profession or small business. It provides for lower tax liability and easy filing of income tax returns.

Q.What is the presumptive income rate for professionals under the PGBP income tax scheme?

Professionals are required to declare their income at 50% of their gross receipts under the PGBP income tax scheme.

Q.What is the presumptive income rate for small businesses under the PGBP income tax scheme?

Small businesses are required to declare their income at 8% of their gross receipts under the PGBP income tax scheme.

Q.Is it mandatory to maintain books of accounts under the PGBP income tax scheme?

Yes, taxpayers availing of the PGBP income tax scheme are required to maintain proper books of accounts, including a cash book, a ledger, and a statement of stock-in-trade.

Q.Can taxpayers under the PGBP income tax scheme claim deductions for expenses?

No, taxpayers under the PGBP income tax scheme cannot claim deductions for expenses as their income is presumed based on certain rates.

Q.How can taxpayers file their income tax returns under the PGBP income tax scheme?

Taxpayers under the PGBP income tax scheme can file their income tax returns using ITR-4 form, which is a simplified return form.

Q.What are the conditions for availing of the PGBP income tax scheme?

Taxpayers availing of the PGBP income tax scheme must maintain proper books of accounts, declare their income at the presumptive rate applicable to their profession or business, and file their income tax returns on or before the due date.

Q.Is the PGBP income tax scheme applicable to all professions and businesses?

No, the PGBP income tax scheme is applicable only to small taxpayers engaged in a profession or small business whose total turnover or gross receipts do not exceed Rs. 2 crores in a financial year.

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