Last reviewed: 13 August 2026. FY 2026-27 is the first year assessed under the new Income-tax Act, 2025, which came into force on 1 April 2026 and repealed the 1961 Act. For small businesses, professionals and transporters the biggest housekeeping change is that the three familiar presumptive sections — 44AD, 44ADA and 44AE — now sit inside a single provision, Section 58. The thresholds and rates you already know are carried forward; the section number and the "tax year" label are what change. This guide sets out who can use the scheme for FY 2026-27, the exact limits and rates, several worked examples, a live estimator, and the two traps that quietly pull a "simple" presumptive taxpayer into a tax audit.
Presumptive taxpayers pay advance tax in one shot by 15 March — the calculator estimates your instalment and any 234C interest.
- What changed under the Income-tax Act 2025
- Presumptive taxation for small business (44AD → 58)
- Presumptive taxation for professionals (44ADA → 58)
- Presumptive taxation for goods transporters (44AE → 58)
- Live estimator
- The five-year lock-in and the audit trap
- Presumptive vs regular books — a decision framework
- Advance tax, ITR form and record-keeping
- GST, TDS and the new-regime slabs
- Non-residents — Section 61
- Before you opt — a 10-point check
- FAQs
What actually changed under the Income-tax Act 2025
Nothing about your day-to-day maths. The Act 2025 is a re-drafting exercise, not a rate revision, so the numbers below are the same ones that applied in the last year of the 1961 Act. What you need to update is the vocabulary and the cross-references: "previous year" and "assessment year" give way to a single tax year (Tax Year 2026-27 carries the income of FY 2026-27), and the presumptive sections are renumbered. The 1961 Act stands repealed from 1 April 2026, with transitional provisions preserving pending matters. Keep this mapping handy when you read the new law or a fresh ITR utility.
| Scheme | Old (1961 Act) | New (Act 2025) |
|---|---|---|
| Small business — presumptive | Section 44AD | Section 58 |
| Specified professionals | Section 44ADA | Section 58 |
| Goods carriage operators | Section 44AE | Section 58 |
| Non-residents (shipping, aircraft, oil services, etc.) | 44B / 44BB / 44BBB | Section 61 |
| Tax audit requirement | Section 44AB | Audit provision continues under Act 2025 |
We keep a fuller cross-reference in our old-vs-new section mapping for the Income-tax Act 2025, and the structural walk-through in Income-tax Act 2025 decoded — Section 58. The single most useful takeaway: your eligibility test and your maths do not move this year — only the labels do.
Presumptive taxation for small business (old 44AD → Section 58)
This is the workhorse scheme — used by traders, retailers, small manufacturers, contractors, kirana and hardware shops, and most non-professional service providers. You declare a fixed percentage of turnover as profit and skip a formal profit-and-loss account. It is available only to a resident individual, HUF or partnership firm (not an LLP). Companies and LLPs are outside it entirely.
| Particulars | Position for FY 2026-27 |
|---|---|
| Standard turnover limit | ₹2 crore |
| Enhanced turnover limit (cash receipts ≤ 5% of turnover) | ₹3 crore |
| Deemed profit — receipts through bank / UPI / cheque / card | 6% of that turnover |
| Deemed profit — cash and other receipts | 8% of that turnover |
| Who can opt | Resident individual, HUF, partnership firm (not LLP) |
| Who cannot | LLPs, companies, commission/agency businesses, goods transporters (use the carriage scheme), and specified professionals |
Two points decide most cases. First, the 6% versus 8% split: the lower 6% rate applies only to the part of turnover actually received through banking or prescribed electronic channels by the due date of filing the return; the balance, including cash, is deemed at 8%. Second, the ₹3 crore enhanced limit is available only when cash receipts are 5% or less of turnover — a single large cash sale can push you over that 5% line and knock you out of the enhanced band.
Note two common exclusions. A business earning commission or brokerage, or running an agency, cannot use this scheme; nor can someone in the business of plying, hiring or leasing goods carriages (that income has its own scheme, below). And you cannot layer the presumptive rate over certain profit-linked incentive deductions claimed in the same year.
Presumptive taxation for professionals (old 44ADA → Section 58)
Professionals in the "specified" list can declare 50% of gross receipts as income. Anything you actually spend below that 50% is your gain; anything above it is not separately deductible. This suits consultants, clinics, boutique practices and freelancers whose real margins are healthy and who would rather not run a full set of books.
| Particulars | Position for FY 2026-27 |
|---|---|
| Standard gross-receipts limit | ₹50 lakh |
| Enhanced limit (cash receipts ≤ 5% of receipts) | ₹75 lakh |
| Deemed profit | 50% of gross receipts |
| Covered professions | Legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, and other notified professions (including information technology, company secretary, authorised representative and film artists) |
The trap here is the "specified profession" boundary. Many people who call themselves consultants are not in a notified profession at all — a marketing consultant, a management consultant or a commission agent is usually running a business, taxed under the 6%/8% scheme, not the 50% professional scheme. Using the wrong scheme is one of the most common errors we correct at filing.
Presumptive taxation for goods transporters (old 44AE → Section 58)
Operators who own up to ten goods vehicles at any time during the year can use a per-vehicle formula instead of a turnover percentage. There is no turnover ceiling here — only the vehicle count. Vehicles taken on hire-purchase or instalments count as owned.
| Vehicle type | Presumptive income |
|---|---|
| Heavy goods vehicle (gross vehicle weight above 12 tonne) | ₹1,000 per tonne of gross vehicle weight, per month (or part of a month) |
| Any other goods vehicle | ₹7,500 per vehicle, per month (or part of a month) |
Live estimator
Enter your own numbers below to see the deemed income and whether you stay within the limits. It runs in your browser and stores nothing.
Live estimator — presumptive income & advance-tax prompt (Section 58)
Pick your category, enter figures, and see the deemed income and eligibility instantly. Estimate only — confirm your position before filing.
Business: 6% on banked receipts, 8% on cash; limit ₹2 crore (₹3 crore if cash is 5% or less). Profession: 50%; limit ₹50 lakh (₹75 lakh if cash is 5% or less). Transport: ₹1,000 per tonne/month (heavy) or ₹7,500 per vehicle/month; up to 10 vehicles. Advance tax is payable in full by 15 March.
The five-year lock-in and the audit trap
This is where "simple" turns costly, and it is the part clients most often miss. The business scheme (old Section 44AD(4), carried into Section 58) expects continuity: once you opt in, you are expected to stay on presumptive for five consecutive years. If you drop out in any of those years — by declaring regular, lower profits — you are barred from the presumptive scheme for the next five years. Worse, in any year you declare income below the presumptive rate and your total income is above the basic exemption limit (₹4 lakh under the default new regime for FY 2026-27), you must maintain books of account and get a tax audit for that year.
| Year | What you do | Consequence |
|---|---|---|
| Year 1 | Opt into presumptive (declare 6%/8%) | Fine — clock starts on the five-year run |
| Years 2–3 | Continue presumptive | Fine |
| Year 4 | Declare lower, regular profit | Books + tax audit for Year 4 (if income above ₹4 lakh); barred from presumptive |
| Years 5–8 | Want to return to presumptive | Not allowed — five-year bar runs from the year you broke continuity |
In other words, the very act of showing a lower profit to save tax is what triggers the audit obligation and locks you out. The disciplined approach is to model the decision once — presumptive versus regular books — and commit, rather than switching year to year. If a tax audit is on the cards, our note on tax audit under Section 44AB — limits and due dates sets out the thresholds and the 3CA/3CB-3CD forms.
Presumptive vs regular books — a decision framework
Presumptive taxation is a convenience, not always a saving. It taxes you on a deemed margin, so it helps when your real margin is at or above the deemed rate, and hurts when it is below. Use this framework before opting in.
| Your situation | Usually better | Why |
|---|---|---|
| Real margin at or above 6%/8% (business) or 50% (profession) | Presumptive | Lower compliance load; you are taxed on the deemed figure, not more |
| Thin real margin (e.g., 2–3% trading) | Regular books | Presumptive would tax profit you did not earn |
| Heavy losses or early-stage business | Regular books | Losses can be computed and carried forward; presumptive gives a positive deemed income |
| Turnover crossing the audit limit anyway | Regular books + audit | You are in audit territory regardless; presumptive gives no relief |
| Simple, healthy-margin proprietorship | Presumptive | Least paperwork, one advance-tax instalment, ITR-4 |
Advance tax, ITR form and record-keeping
- Advance tax in one shot. A presumptive taxpayer pays the entire advance-tax liability by 15 March in a single instalment — there is no June/September/December split. A shortfall attracts interest under Sections 234B and 234C. Amounts paid up to 31 March are also treated as advance tax. Estimate yours with the Advance Tax Calculator.
- Which ITR. Eligible resident individuals, HUFs and firms (other than LLPs) with presumptive income and total income up to ₹50 lakh generally file ITR-4 (Sugam). If you fall outside Sugam — turnover above the limits, capital gains, foreign assets, or you are a company director or hold unlisted shares — file ITR-3 with regular computations. See the ITR filing hub for AY 2026-27 for form selection.
- No second bite at expenses. All business expenses and depreciation are deemed allowed within the presumptive rate — you cannot deduct them again. Depreciation is treated as claimed, so the written-down value of your assets is reduced for a future sale.
- You still substantiate turnover. Presumptive does not mean "no records". You should be able to prove your turnover, receipts split and vehicle details if asked; the relief is from a formal P&L and balance sheet, not from basic evidence.
GST, TDS and the new-regime slabs — how they interact
Presumptive taxation fixes only your income-tax profit. It does not touch your other obligations. Your GST registration and returns run on their own turnover tests and are unaffected by how you compute income tax. TDS you are required to deduct on your payments (rent, contractor, professional fees, and — for firms — partner remuneration under the newer provisions) continues to apply; presumptive income does not exempt you from being a deductor. And your slab and rebate are governed by the default new regime: a ₹4 lakh basic exemption and a rebate that keeps income up to ₹12 lakh tax-free for resident individuals. Weigh the regime using our old vs new regime break-even guide.
Non-residents — a note on Section 61
Presumptive taxation for non-residents is not part of Section 58. The Act 2025 gathers the old non-resident provisions (shipping, aircraft, oil-field services and turnkey projects) into Section 61, at rates such as 7.5% for shipping, 5% for aircraft operation, 20% for cruise operations, 10% for turnkey power projects and mineral-oil services, and 25% for certain electronics-manufacturing technology services. If you are a resident, Section 58 is your scheme; Section 61 is a separate regime for specified non-resident activities.
- Are you a resident individual, HUF or firm (not an LLP or company)?
- Is your activity a business (6%/8%), a specified profession (50%) or goods transport (per vehicle)?
- Is turnover within ₹2 crore, or ₹3 crore with cash ≤ 5% (business)?
- Are professional receipts within ₹50 lakh, or ₹75 lakh with cash ≤ 5%?
- For transport, do you own 10 or fewer goods vehicles at all times?
- Is your real margin at or above the deemed rate — or would regular books tax you on less?
- Can you pay the whole advance tax by 15 March to avoid 234B/234C?
- Are you ready to stay on the scheme for five years (business), or accept the audit trap on exit?
- Have you kept enough records to prove turnover and the cash/digital split?
- Have you confirmed the correct ITR form and the final Section 58 references in the utility?
Common mistakes we see
- Applying 6% to everything. The 6% rate is only for turnover actually received through banking or electronic channels by the return due date; the cash portion is taxed at 8%.
- Hopping in and out of the scheme, then being surprised by the five-year bar and a tax audit.
- An LLP or company assuming it qualifies — the business and professional scheme excludes both.
- A general consultant filing under the 50% professional rate when the activity is really a business (6%/8%), not a "specified profession".
- Claiming partner remuneration, interest or extra expenses over and above presumptive income — not allowed.
- Forgetting the single 15 March advance-tax instalment and paying 234B/234C interest on an otherwise tidy return.
- Opting for presumptive on a thin margin and paying tax on profit that was never earned.
Frequently asked questions
Is presumptive taxation compulsory?
No. It is an optional scheme. An eligible taxpayer may declare income on a presumptive basis, declare a higher actual profit, or keep regular books and be taxed on the real figure. The scheme exists to reduce the compliance burden for small businesses and professionals, not to force a particular result.
Can an LLP or a company use the presumptive scheme?
No. The business and professional presumptive scheme (old Sections 44AD/44ADA, now Section 58) is available only to a resident individual, HUF or a partnership firm that is not an LLP. LLPs and companies must maintain regular books and file ITR-5 or ITR-6.
My receipts come entirely through bank and UPI. What rate applies?
For an eligible business, the deemed profit on turnover received through banking or prescribed electronic channels is 6%, against 8% on cash or other receipts. So a fully banked business is assessed at 6% on that turnover — the lower rate is a deliberate nudge towards digital collections.
Do I still pay advance tax if I opt for presumptive taxation?
Yes. A presumptive taxpayer pays the whole advance-tax liability in a single instalment on or before 15 March of the year. Miss it and interest under Sections 234B and 234C applies, even though the return itself is simpler. See our advance-tax guide for AY 2026-27 for the mechanics.
Can I separately claim business expenses, depreciation or partner remuneration?
No. Under the presumptive scheme all expenses and depreciation are deemed to have been allowed, so they cannot be deducted again. Depreciation is also treated as claimed, which reduces the written-down value of your assets for a future sale. On the current position a firm also cannot separately deduct partner salary or interest from presumptive business income.
I am a doctor with gross receipts of ₹80 lakh — can I use the professional scheme?
Not for that year. The professional presumptive limit is ₹50 lakh, extended to ₹75 lakh only where cash receipts are 5% or less of total receipts. Receipts of ₹80 lakh cross even the enhanced limit, so you must maintain books and a tax audit applies. Within ₹75 lakh, the deemed profit is 50% of gross receipts.
Does the Income-tax Act 2025 change the numbers?
The thresholds and rates have been carried forward — what mainly changes is the section number (old 44AD, 44ADA and 44AE now sit in Section 58) and the shift from "assessment year" to "tax year". Non-resident presumptive provisions move to Section 61. Confirm the final section references in the ITR utility when you file for Tax Year 2026-27.
If I declare less than the presumptive rate, what happens?
If you declare income below the presumptive rate and your total income is above the basic exemption limit (₹4 lakh under the default new regime for FY 2026-27), you must maintain books under the record-keeping rules and get a tax audit. Casually declaring a lower figure to save tax is exactly what pulls a small taxpayer into audit.
My real profit margin is only 3%. Is presumptive still worth it?
Probably not. If your genuine margin is below the deemed rate, presumptive taxes you on profit you did not earn. A low-margin trader is usually better off keeping regular books and getting a tax audit if the turnover crosses the audit limit. Presumptive helps when your real margin is at or above the deemed rate and you want to avoid the compliance load.
Does turnover here include GST?
Treat turnover as your total sales or gross receipts from the business. Where indirect tax is collected separately and paid over to the government, a consistent, defensible basis should be used and applied every year. When in doubt, we compute turnover both ways and take the position that is correct for your billing pattern.
Can I use presumptive for one business and regular books for another?
Each business is looked at on its own facts, but the five-year continuity condition and the audit test apply where you use the business scheme. Running one activity on presumptive and switching another in and out is exactly the pattern that triggers the lock-in. Model the whole picture before you split treatment.
I earn commission / brokerage. Can I use Section 44AD (now 58)?
No. Commission and agency income is specifically excluded from the business presumptive scheme, as is income from plying, hiring or leasing goods carriages (which has its own scheme). You would compute that income on a regular basis, or under the carriage scheme where it applies.
We model the decision for your turnover, receipt mix and audit exposure, and file it correctly the first time.
Income Tax filing & advisory Tax Audit u/s 44AB Bookkeeping & accounts Talk to our teamThis article is for general information for FY 2026-27 / Tax Year 2026-27 and is not a substitute for advice on your specific facts. Figures reflect the presumptive provisions carried into Section 58 of the Income-tax Act, 2025; confirm the exact section references in the ITR utility when you file. The estimator gives an indicative figure only. Verify your eligibility and audit position before opting in.