Last reviewed: 25 September 2026. Presumptive taxation is one of the biggest compliance conveniences in Indian tax: declare a fixed percentage of turnover or receipts, skip detailed books, and avoid audit within the limits. The Income-tax Act, 2025, in force from tax year 2026-27, carries all three schemes into a single provision, section 58. This guide maps the old sections to the new, and explains eligibility, rates, limits, the five-year bar and who the schemes suit. For FY 2025-26 and earlier years, the 1961 Act sections (44AD, 44ADA, 44AE) still apply.
At a glance
Section map: old Act to new Act
| Scheme | Income-tax Act, 2025 | Old (1961 Act) |
|---|---|---|
| Business presumptive | Section 58(2), Table S.No. 1 | 44AD |
| Goods carriages | Section 58(2), Table S.No. 2 | 44AE |
| Profession presumptive | Section 58(2), Table S.No. 3, with sub-sections 58(5) and 58(9) | 44ADA |
| Five-year bar after opting out | Section 58(7) | 44AD(4) |
| Tax audit on declaring lower profit | Section 63 | 44AB |
The presumptive schemes
| Scheme | Deemed income | Limit |
|---|---|---|
| Business | 8% of turnover (6% for digital receipts) | Turnover up to Rs 2 crore (Rs 3 crore if cash within 5%) |
| Profession | 50% of gross receipts | Receipts up to Rs 50 lakh (Rs 75 lakh if cash within 5%) |
| Transport (goods carriage) | Heavy goods vehicle (above 12,000 kg gross vehicle weight): Rs 1,000 per ton of gross vehicle weight per month. Other goods carriage: Rs 7,500 per vehicle per month | Not more than 10 goods carriages owned at any time in the year |
Who is eligible
| Scheme | Who can use it | Who cannot |
|---|---|---|
| Business (S.No. 1) | Resident individual, HUF or partnership firm | LLPs, companies, non-residents; agency, commission or brokerage income; specified professions |
| Profession (S.No. 3) | Resident individual or partnership firm in a specified profession: legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration and other notified professions | LLPs, companies, non-residents |
| Goods carriage (S.No. 2) | Any person in the business of plying, hiring or leasing goods carriages | Owners of more than 10 goods carriages at any time in the year |
Non-residents have separate presumptive provisions for specified businesses in section 61 of the 2025 Act, and an NRI consultant cannot use the professional scheme. Our CA for NRIs service covers how non-resident professionals are taxed on Indian receipts.
Worked example: Rs 1.8 crore turnover, 97% digital
A resident trader has turnover of Rs 1.8 crore in tax year 2026-27. Rs 1,74,60,000 (97%) is received by bank transfer and UPI; Rs 5,40,000 (3%) in cash.
| Component | Rate | Deemed income |
|---|---|---|
| Digital receipts Rs 1,74,60,000 | 6% | Rs 10,47,600 |
| Cash receipts Rs 5,40,000 | 8% | Rs 43,200 |
| Minimum income to declare | Rs 10,90,800 |
Turnover is within Rs 2 crore, so the scheme applies even without the cash test; the 3% cash share would also keep the trader within the Rs 3 crore limit if turnover grows. Advance tax can be paid in a single instalment by 15 March 2027.
The five-year bar in section 58(7)
Suppose the trader uses the business scheme for tax years 2026-27 and 2027-28, then declares profit of 4% in tax year 2028-29. Having dropped below the presumptive rate within five years of opting in, the trader cannot use the scheme for tax years 2029-30 to 2033-34. If income in those years exceeds the basic exemption limit, books and a tax audit under section 63 are required.
Who it suits and the catch
Presumptive taxation suits small businesses, consultants, freelancers and transporters who want simplicity and whose real margins are at or above the deemed rate. The catch: if you declare lower profits than the presumptive rate and your income exceeds the basic exemption, audit and full books become applicable, so the scheme works well where the deemed rate reasonably reflects your margins. For a freelancer-focused view, see our freelancer tax guide.
Frequently asked questions
What is presumptive taxation?
Presumptive taxation lets eligible small businesses and professionals declare income at a prescribed percentage of turnover or receipts, without maintaining detailed books or undergoing audit, simplifying compliance.
What are the presumptive schemes carried into the new Act?
All three continue in section 58 of the Income-tax Act, 2025, in the Table in section 58(2): S.No. 1 is the business scheme (old 44AD), S.No. 2 the goods-carriage scheme (old 44AE) and S.No. 3 the professional scheme (old 44ADA).
What is the business presumptive rate and limit?
Eligible businesses declare 8% of turnover, or 6% for receipts through banking or digital modes, with turnover up to Rs 2 crore (extended to Rs 3 crore where cash receipts are within 5% of turnover).
What is the professional presumptive scheme?
Eligible resident professionals declare 50% of gross receipts as income, with receipts up to Rs 50 lakh (extended to Rs 75 lakh where cash receipts are within 5%).
Do I have to keep books under presumptive taxation?
No detailed books are required while you stay within the scheme, which is its main attraction. If you declare lower profits and your income exceeds the basic exemption, books and a tax audit under section 63 of the 2025 Act (old 44AB) become applicable.
Which ITR do presumptive taxpayers file?
For AY 2026-27 (FY 2025-26) it was ITR-4 (Sugam) within the presumptive limits, and ITR-3 for actual profits. Return forms for tax year 2026-27 are to be notified under the Income-tax Rules, 2026, so check the form applicable when you file.
Does the new Act change presumptive taxation substantively?
No. The 2025 Act gathers the three schemes into one section with a table, and the rates, thresholds and the five-year bar are carried forward unchanged in substance.
Where is presumptive taxation in the new Act?
Section 58 of the Income-tax Act, 2025. The Table in section 58(2) lists the three schemes, sub-sections 58(5) and 58(9) carry the professional-scheme conditions, and section 58(7) carries the five-year bar after opting out (old 44AD(4)).
What happens if I opt out of the business scheme after using it?
If you opt for the business scheme and then declare profit below the presumptive rate in any of the next five years, section 58(7) (old 44AD(4)) bars you from the scheme for the following five years. If your income then exceeds the basic exemption limit, you must keep books and get a tax audit.
Can an NRI use the professional presumptive scheme?
No. The business and professional schemes are for residents. Non-residents have separate presumptive provisions for specified businesses in section 61 of the 2025 Act, and otherwise compute actual profits.
When is advance tax due under the presumptive scheme?
Taxpayers under the business and professional schemes can pay the whole of their advance tax in one instalment by 15 March of the tax year.
We advise on presumptive vs actual profits, keep you within the limits, and file the correct ITR.
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WhatsAppLinkedInSchedule a callDisclaimer: This article is for general guidance only and reflects the Income-tax Act, 2025 as on 25 September 2026. Return forms and rules for tax year 2026-27 are being notified; please confirm the current position before relying on it.