TaxSaral
Section 58Special Incomewas Section 44AD / 44ADA in IT Act 1961

Presumptive Taxation — Small Business & Professionals

Small businesses (turnover ≤ ₹3 crore) and professionals (receipts ≤ ₹75 lakh) can declare income at a deemed rate without detailed books of accounts.

Who this applies to

Small traders, shopkeepers, and self-employed professionals (doctors, lawyers, engineers, consultants) with income below the turnover threshold.

Key Points

  • Business: declare 8% of gross turnover as income (6% if receipts are digital/banking-based) — no need to prove actual profit.
  • Professionals: declare 50% of gross receipts as income — the presumed profit rate.
  • No need to maintain detailed books of accounts, balance sheets, or get accounts audited.
  • If you opt for presumptive taxation, you must continue for 5 consecutive years — switching back early has consequences.

Worked Examples

1

Freelance consultant under presumptive taxation

Scenario

Rekha is a freelance HR consultant with annual billings of ₹60L (all via bank transfers). She opts for presumptive taxation under Section 58 (professionals — 50% rate).

Calculation

Gross receipts: ₹60,00,000
Presumed income: 50% × ₹60L = ₹30,00,000

Tax on ₹30L (default regime):
  ₹0–4L: Nil
  ₹4L–8L: 5% = ₹20,000
  ₹8L–12L: 10% = ₹40,000
  ₹12L–16L: 15% = ₹60,000
  ₹16L–20L: 20% = ₹80,000
  ₹20L–24L: 25% = ₹1,00,000
  ₹24L–30L: 30% = ₹1,80,000
  Total: ₹4,80,000
  Plus 4% cess: ₹4,99,200

Result

Rekha pays tax on ₹30L deemed income without proving her actual expenses. If her real expenses are less than 50% of billings (e.g., she works from home with minimal overhead), presumptive taxation is disadvantageous. If expenses exceed 50%, she should consider detailed accounting instead.

2

Small shopkeeper — digital payments benefit

Scenario

Vinod runs a hardware store with ₹1.5 crore annual turnover — 80% via UPI/card (digital), 20% cash. He opts for presumptive taxation.

Calculation

Digital receipts (80%): ₹1,20,00,000 → presumed income @ 6% = ₹7,20,000
Cash receipts (20%):   ₹30,00,000 → presumed income @ 8% = ₹2,40,000
Total presumed income: ₹9,60,000

Tax on ₹9,60,000 (default regime):
  ₹0–4L: Nil
  ₹4L–8L: 5% × ₹4L = ₹20,000
  ₹8L–9.6L: 10% × ₹1.6L = ₹16,000
  Total: ₹36,000 + 4% cess = ₹37,440

Result

Vinod pays ₹37,440 tax on ₹1.5 crore turnover — without audited accounts or detailed books. Encouraging customers to pay digitally lowers his presumed income rate from 8% to 6%, saving him tax.

Related Sections

Section 14Heads of Income
Sections 403–408Advance Tax — Obligation and Instalments
Section 202Default Tax Regime — Slabs

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Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative — verify with a Chartered Accountant before filing.