Presumptive Taxation under the Income-tax Act, 2025: A Complete Guide to Section 58

Understanding the new presumptive taxation rules for small businesses, professionals and goods transport operators from Tax Year 2026–27

Presumptive taxation is designed to simplify income-tax compliance for eligible small businesses, professionals and transport operators. Instead of calculating taxable business income by deducting every eligible expense from actual receipts, taxpayers can determine their income using the prescribed presumptive rates, subject to the applicable conditions.

With the introduction of the Income-tax Act, 2025, the presumptive taxation provisions previously covered under Sections 44AD, 44ADA and 44AE of the Income-tax Act, 1961, have been consolidated into Section 58. The new Act applies from 1 April 2026, making Tax Year 2026–27 the first tax year under the new framework.

The consolidation brings the three schemes together in a single provision and adopts a tabular format to make the rules easier to navigate. However, taxpayers and tax practitioners must understand the eligibility requirements, prescribed income rates, restrictions on deductions and consequences of declaring lower profits.

Source: Income Tax Department, Section 58 of the Income-tax Act, 2025.

1. What is presumptive taxation?

Presumptive taxation is a simplified method of computing taxable business or professional income. Under this system, an eligible taxpayer declares income using the prescribed percentage of turnover or gross receipts, or a higher amount representing actual profits.

The scheme is intended to reduce the compliance burden for eligible taxpayers who would otherwise need to maintain detailed books of account and meet the applicable audit requirements.

For example, if an eligible business receives ₹50 lakh through specified digital payment modes, its presumptive income under Section 58 would ordinarily be ₹3 lakh, calculated at 6%, provided the applicable conditions are satisfied.

This does not mean that the taxpayer's actual profit must be exactly 6%. If the actual profit is higher, the higher amount must be considered under the statutory provisions.

2. What has changed under Section 58?

Under the earlier Income-tax Act, 1961, the principal presumptive taxation schemes were distributed across three sections:

• Section 44AD: Eligible businesses other than goods carriage businesses.
• Section 44ADA: Specified professionals.
• Section 44AE: Businesses involving the plying, hiring or leasing of goods carriages.

The Income-tax Act, 2025, brings these schemes together under Section 58 in a consolidated table.

The principal rates and turnover or receipt thresholds have largely been carried forward. However, taxpayers should not assume that every eligibility condition or compliance consequence is identical to the earlier law.

3. Presumptive taxation rates and limits under Section 58

The following table summarises the principal provisions of Section 58 of the Income-tax Act, 2025.

Particulars	Eligible business	Specified profession	Goods carriage business
Eligible taxpayers	Resident individuals, HUFs and eligible partnership firms, excluding LLPs	Resident individuals and eligible firms, excluding LLPs	Eligible taxpayers owning not more than 10 goods carriages at any time during the tax year
Normal turnover or receipt limit	₹2 crore	₹50 lakh	Based on the prescribed vehicle computation
Enhanced limit	₹3 crore if cash receipts do not exceed 5% of turnover or gross receipts	₹75 lakh if cash receipts do not exceed 5% of gross receipts	Not applicable
Presumptive income	6% of qualifying specified digital receipts and 8% of the balance receipts, or higher actual profit	50% of gross receipts, or higher actual profit	₹1,000 per ton per month for heavy goods vehicles and ₹7,500 per vehicle per month for other goods vehicles, or higher actual profit

Important: The table is a summary, not a substitute for checking all statutory eligibility conditions. The definition of qualifying receipts, eligible activities and other restrictions must be examined before selecting the scheme.

Official reference: Section 58 — Income-tax Act, 2025.

4. Presumptive taxation for eligible businesses

Under Section 58, eligible businesses other than the specified goods carriage business may calculate presumptive income using the following rates:

• 6% of turnover or gross receipts received through the specified banking or online payment modes.
• 8% of the remaining turnover or gross receipts.

The normal turnover limit is ₹2 crore. This limit increases to ₹3 crore where cash receipts do not exceed 5% of total turnover or gross receipts.

The scheme is not available to every business. Among other conditions, the eligible assessee must satisfy the statutory definition, be a resident individual, Hindu undivided family or eligible partnership firm, and must not carry on specified professional, agency or commission or brokerage activities covered by the exclusions.

Example: Retail business

Suppose Mr. Rajesh Mehta operates a retail business during Tax Year 2026–27 with the following turnover:

Particulars	Amount
Digital receipts	₹2,30,00,000
Cash receipts	₹10,00,000
Total turnover	₹2,40,00,000
Cash receipts as a percentage of turnover	4.17%

Since cash receipts are below 5% of total turnover, the enhanced ₹3 crore turnover limit may be available, subject to all other eligibility conditions.

His presumptive income would be calculated as follows:

Particulars	Calculation	Income
Digital receipts	₹2,30,00,000 × 6%	₹13,80,000
Cash receipts	₹10,00,000 × 8%	₹80,000
Total presumptive income		₹14,60,000

Accordingly, the presumptive income would be ₹14.60 lakh, unless the actual profit claimed is higher.

If Mr. Rajesh Mehta wishes to declare income below the prescribed presumptive amount, the consequences under Section 58(3), including applicable books-of-account and audit requirements, must be examined.

5. Presumptive taxation for specified professionals

Section 58 also covers specified professions referred to in Section 62(4).

These include eligible practitioners in fields such as:

• Legal services
• Medical services
• Engineering
• Architecture
• Accountancy
• Technical consultancy
• Interior decoration
• Information technology
• Company secretary services
• Other professions notified by the prescribed authority

The normal gross-receipt limit is ₹50 lakh. This increases to ₹75 lakh where cash receipts do not exceed 5% of total gross receipts.

Eligible professionals can declare 50% of gross receipts as presumptive income, or a higher amount representing actual profit.

Eligibility must be checked carefully because the scheme does not automatically cover every self-employed person, consultant or service provider.

Example: Medical professional

Suppose Dr. Priya Sharma operates a private clinic and earns the following gross receipts:

Particulars	Amount
Digital receipts	₹66,00,000
Cash receipts	₹2,00,000
Total gross receipts	₹68,00,000
Cash receipts as a percentage of gross receipts	2.94%

Since cash receipts are below 5%, the enhanced ₹75 lakh threshold may be available, subject to the other statutory conditions.

The presumptive income calculation is:

₹68,00,000 × 50% = ₹34,00,000

The doctor would ordinarily declare ₹34 lakh as presumptive professional income, unless the actual profit claimed is higher.

Expenses such as clinic rent, employee salaries and equipment depreciation cannot separately be deducted against the income computed under Section 58, as provided in Section 58(4).

If the doctor wishes to declare a lower profit, the requirements concerning books of account and tax audit must be evaluated under the applicable provisions.

6. Presumptive taxation for goods carriage businesses

Section 58 also consolidates the presumptive taxation provisions for taxpayers engaged in the business of plying, hiring or leasing goods carriages.

The scheme applies to an assessee who owns not more than ten goods carriages at any time during the tax year.

The prescribed income is calculated on a vehicle-based basis:

• Heavy goods vehicles: ₹1,000 per ton of gross vehicle weight or unladen weight, as applicable, for every month or part of a month during which the vehicle is owned.
• Other goods vehicles: ₹7,500 per vehicle for every month or part of a month during which the vehicle is owned.

If the actual profit claimed is higher than the amount computed under the prescribed formula, the higher actual profit applies.

Transport operators should maintain appropriate vehicle records and verify the relevant ownership period, vehicle classification and applicable statutory conditions.

7. Can expenses and deductions be claimed separately?

One of the important provisions of Section 58 is the restriction contained in subsection (4).

It provides that any loss, allowance or deduction otherwise allowable under the Act cannot be allowed against income computed under the presumptive method specified in Section 58(2).

Consequently, taxpayers should not calculate presumptive income and then reduce it further by separately claiming business expenses, depreciation or brought-forward business losses against that presumptive income.

However, this restriction should be interpreted in its statutory context. It does not, by itself, settle every question concerning deductions available against total income under other provisions of the Act.

Taxpayers should separately examine their eligibility for deductions under the relevant provisions, including applicable Chapter VIII deductions, and the effect of the chosen tax regime. Professional advice is recommended where the treatment is uncertain.

8. What happens if a taxpayer declares lower profits?

Section 58(3) deals with cases where a taxpayer claims that actual profits are lower than the presumptive amount.

Where the taxpayer declares lower profits and total income exceeds the maximum amount not chargeable to income-tax, the taxpayer is required to:

1. Maintain the books of account and other documents required under Section 62.
2. Get the accounts audited and furnish the audit report as required under Section 63.

This means that the presumptive scheme should not be treated as an unrestricted option to declare any profit amount without supporting records.

The consequences depend on the taxpayer's circumstances and the statutory conditions. Before declaring income below the presumptive amount, taxpayers should evaluate the additional compliance burden and potential tax implications.

9. The five-year restriction for eligible businesses

Section 58(7) contains a restriction for eligible businesses that move out of the presumptive scheme.

Broadly, where an eligible assessee declares income under the presumptive provisions for a tax year and then declares income contrary to the prescribed scheme in any of the five succeeding tax years, the assessee becomes ineligible to claim the benefit of Section 58 for five tax years following the tax year in which the deviation occurs.

The detailed implications, including the related books-of-account and audit requirements, must be checked under Section 58(7) and Section 58(8).

This restriction applies to the eligible business scheme described in the provision and should not be indiscriminately applied to every category of presumptive taxpayer.

Businesses should evaluate the likely profitability and compliance requirements over multiple years before choosing to enter or exit the scheme.

10. Practical checklist for tax practitioners

Before advising a client to adopt presumptive taxation under Section 58, consider the following:

• Confirm the taxpayer's residential status and eligibility.
• Identify whether the activity is an eligible business, specified profession or goods carriage business.
• Verify the applicable turnover or gross-receipt threshold.
• Calculate the proportion of cash receipts and check whether the enhanced limit is available.
• Separate qualifying digital receipts from other receipts where the 6% and 8% rates apply.
• Compare the prescribed presumptive income with actual profit.
• Explain the restrictions on separate expenses, losses, allowances and deductions.
• Review the consequences of declaring income below the presumptive amount.
• Check the five-year restriction where relevant.
• Evaluate advance-tax obligations, return-filing requirements and other applicable compliance provisions.

Conclusion

The consolidation of presumptive taxation provisions under Section 58 of the Income-tax Act, 2025, is a significant simplification in the presentation of the law.

The scheme continues to provide eligible small businesses, specified professionals and goods carriage operators with a simplified method of computing taxable income. At the same time, taxpayers must carefully evaluate the applicable eligibility requirements, prescribed rates, restrictions on deductions and consequences of declaring lower profits.

For tax practitioners, the key is to look beyond the headline percentages and turnover limits. A proper assessment of the client's business activity, receipt pattern, actual profitability and future compliance needs is essential before recommending presumptive taxation.

Disclaimer: This article is intended for general informational and educ

ational purposes. It is based on Section 58 of the Income-tax Act, 2025, and related provisions available from the Income Tax Department. It should not be treated as personalised tax or legal advice. Verify the current Act, applicable Rules, notifications and relevant facts before making a tax-compliance decision.

Official references

1. Section 58 — Presumptive taxation under the Income-tax Act, 2025
2. Section 62 — Maintenance of books of account
3. Income-tax Act, 2025 — Official Income Tax Department portal