Presumptive taxation offers eligible small businesses, professionals and goods transport operators a simpler way to calculate taxable business income. From 1 April 2026, the Income-tax Act, 2025 brings the familiar presumptive schemes for businesses, specified professionals and goods carriage into a single provision: Section 58. The framework is set out in a table, but taxpayers still need to check eligibility, income thresholds, payment methods and audit conditions before choosing it.
WhatsApp Channel for notes and updates on GST, Income Tax, TDS, TCS, Export and Accountancy: whatsapp.com/channel/0029Va6GOVE9MF92Ylmo7e0L
What does Section 58 change?
Under the Income-tax Act, 1961, presumptive taxation was covered by separate provisions: Sections 44AD for eligible businesses, 44ADA for specified professionals and 44AE for goods carriage businesses. The Income-tax Act, 2025 consolidates these schemes under Section 58.
This is primarily a structural change: the schemes are brought together in one table with columns for the type of business or profession, eligible assessee, turnover or receipt limit, and method for calculating deemed profit. The Income Tax Department’s transition FAQs describe the consolidation as a move to a table-based format and simplified language. The new Act came into force on 1 April 2026.
Section 58(1) says that provisions in Sections 26 to 54 do not apply to the extent they conflict with the presumptive computation for the specified activities listed in Section 58(2). In practical terms, once a taxpayer uses the scheme, profit is computed under the applicable presumptive method rather than by separately calculating every business expense.
The key point is not to assume that every old rule has disappeared or that every detail has changed. The new law consolidates the framework, while the taxpayer must still apply the conditions for the relevant category.
Who can use the presumptive taxation schemes?
Section 58 groups the schemes into three broad categories:
- Eligible businesses, previously covered by Section 44AD.
- Goods carriage businesses, previously covered by Section 44AE.
- Specified professions, previously covered by Section 44ADA.
The eligibility conditions differ across these categories. A taxpayer should identify the correct category before applying a turnover limit or profit percentage.
Presumptive taxation for eligible businesses
The business scheme is intended for qualifying resident individuals, Hindu Undivided Families (HUFs) and resident partnership firms. A Limited Liability Partnership (LLP) is not eligible under this category.
The scheme is also unavailable to certain businesses, including commission or brokerage businesses, agency businesses and specified professions. A taxpayer should check the statutory exclusions before relying on the presumptive method.
Turnover limit: ₹2 crore or ₹3 crore
The standard turnover limit discussed in the video is ₹2 crore. It can increase to ₹3 crore if cash receipts do not exceed 5% of total turnover or gross receipts.
For this test, a cheque or bank draft that is not account-payee is treated as cash. Do not classify such a receipt as a digital receipt simply because the payment came by cheque.
How is presumptive business income calculated?
The general calculation described in the video is:
- 6% of qualifying receipts received through digital or banking modes.
- 8% of cash receipts.
These percentages are presumptive profit rates. If the business’s actual profit is higher, the higher actual profit should be reported.
The five-year restriction
The business scheme carries a restriction that taxpayers should consider before opting in. If a taxpayer declares profits in accordance with the scheme and later declares income below the prescribed presumptive level, the scheme may become unavailable for the following five assessment years under the applicable rule.
This is not a minor procedural detail. A business with fluctuating margins should compare the presumptive method with regular books and tax computation before making a decision.
When can an audit be required?
If a taxpayer declares profits below the presumptive rate and total income exceeds the applicable basic exemption limit, the taxpayer may need to maintain books of account and obtain an audit, subject to the statutory conditions.
That can substantially reduce the compliance simplicity the taxpayer expected from presumptive taxation. Keep turnover records, receipt details and bank information organised throughout the year.
Presumptive taxation for goods carriage businesses
The goods carriage scheme works differently from the business turnover scheme. Its calculation is based on the number and type of goods vehicles, not on a general turnover percentage.
The 10-vehicle condition
The video highlights a limit of 10 goods vehicles. If the taxpayer owns or operates more than 10 qualifying goods vehicles at any point during the year, the scheme may not be available. The timing matters: the condition is not limited to the year-end vehicle count.
Monthly deemed income
The calculation described in the video is:
- Heavy goods vehicle: ₹1,000 per tonne of gross vehicle weight, for each month or part of a month.
- Other goods vehicle: ₹7,500 for each month or part of a month.
A part-month is counted as a full month for this calculation. For example, if a vehicle is used for only a few days in a month, the deemed income calculation can still cover the full month.
A heavy goods vehicle is identified by its gross vehicle weight exceeding 12,000 kilograms. The vehicle must also meet the definition of a goods carriage; not every truck automatically qualifies.
Other points for transport operators
The video notes that this category does not carry the same five-year restriction described for the eligible-business scheme. It also notes that a partnership firm may deduct partner remuneration and interest, subject to the applicable provisions and limits.
Advance tax is generally paid in the normal instalments for this category, rather than through the one-instalment rule that applies to certain other presumptive taxpayers. Confirm the applicable payment schedule for the relevant tax year.
Presumptive taxation for specified professionals
The professional scheme is relevant to specified professions such as accountancy, medicine, law and architecture. The scheme is available to qualifying resident individuals and partnership firms; LLPs are excluded.
Gross-receipt limits: ₹50 lakh or ₹75 lakh
The standard gross-receipt limit is ₹50 lakh. It can increase to ₹75 lakh where cash receipts do not exceed 5% of total gross receipts.
This 5% condition is important. A professional should review how clients pay before assuming the higher threshold applies.
How is professional income calculated?
The presumptive rate described in the video is 50% of gross receipts. The remaining half is treated as covering expenses under the presumptive method, so the taxpayer does not separately claim ordinary business expenses against that deemed profit.
If actual profit is higher than 50% of receipts, the higher amount should be reported.
When may a professional need an audit?
If a professional declares income below the presumptive rate and total income exceeds the applicable basic exemption limit, books of account and an audit may be required under the relevant conditions.
Before declaring a lower profit, compare the likely compliance cost of maintaining books and obtaining an audit with the benefit of reporting actual income.
What expenses and deductions are affected?
Section 58 provides a presumptive method for computing the specified business or professional income. Under that method, taxpayers generally cannot separately deduct the expenses that the presumptive profit is intended to cover.
The video refers to deductions under Sections 30 to 38 of the 1961 Act and explains that depreciation is not separately claimed under the presumptive calculation. It also points out a consequential adjustment: the written-down value of an asset may be reduced as if depreciation had been claimed.
That adjustment matters when calculating the asset’s tax value in later years. Keep fixed-asset records even if you use presumptive taxation.
The video also notes that eligible deductions under Chapter VI-A, such as those historically associated with Sections 80C and 80D, may still be available subject to the conditions of the applicable law and tax regime. A deduction from total income is a separate question from the calculation of presumptive business profit.
Important definitions to understand
A few terms in the scheme can affect eligibility and calculation:
- Eligible assessee: The taxpayer categories permitted to use the relevant business scheme.
- Specified assessee: The resident individuals and firms permitted to use the specified-profession scheme.
- Heavy goods vehicle: A qualifying goods vehicle with gross vehicle weight above 12,000 kilograms.
- Goods carriage: A registered vehicle constructed or adapted to carry goods.
- Deemed owner: A person may be treated as the vehicle’s owner even when the vehicle was acquired under a hire-purchase arrangement and instalments remain unpaid.
- LLP: The video explains that LLPs are excluded from the eligible-business and specified-profession categories discussed here.
Always check the exact statutory wording and facts of the taxpayer’s case before applying a definition.
Cash deposits and presumptive income
A common concern is whether every bank cash deposit can be taxed separately as unexplained income when the taxpayer has declared business income on a presumptive basis.
The principle discussed in the video is that a genuine deposit connected with disclosed turnover should be considered in the context of the business receipts and presumptive income declared. The tax calculation is based on the applicable presumptive rate applied to eligible turnover or receipts—not automatically on every individual deposit as a separate item of business profit.
That does not mean every deposit is automatically explained. The taxpayer should be able to establish the source and connection with the business, and should maintain records that reconcile turnover, receipts and bank deposits. The legal principle depends on the facts and relevant case law.
Comparing the three schemes
| Category | Earlier provision | Main threshold or test | Presumptive calculation discussed in the video | Lock-in or payment point |
|---|---|---|---|---|
| Eligible business | Section 44AD | ₹2 crore; potentially ₹3 crore where cash receipts are within the prescribed limit | 6% on qualifying digital receipts and 8% on cash receipts | Five-year restriction may apply if the taxpayer exits after opting in |
| Goods carriage | Section 44AE | No general turnover limit; vehicle-count condition applies | ₹1,000 per tonne per month for heavy vehicles; ₹7,500 per month for other vehicles | No equivalent five-year restriction noted; normal advance-tax instalments |
| Specified profession | Section 44ADA | ₹50 lakh; potentially ₹75 lakh where cash receipts are within the prescribed limit | 50% of gross receipts | No equivalent five-year restriction noted; advance-tax rules must be checked |
This table summarises the categories and figures covered in the video. Eligibility, statutory definitions and tax-year rules still need to be checked for the taxpayer’s specific facts.
Practical points to consider before choosing presumptive taxation
Presumptive taxation can reduce the need to calculate profit by deducting each expense, but it does not automatically reduce the tax bill. Consider these points before opting in:
- Check eligibility first. Confirm the taxpayer type, business or profession, and any exclusions.
- Track cash and digital receipts separately. The cash percentage can affect the turnover or receipt threshold.
- Compare presumptive profit with actual profit. If actual profit is higher, the higher amount may need to be declared.
- Understand the business lock-in rule. Exiting after opting in can have consequences for future eligibility.
- Assess the audit impact. Declaring below the presumptive rate can trigger additional bookkeeping and audit requirements.
- Consider loan applications. Reported income can influence how lenders assess repayment capacity. Declaring lower income for tax purposes may affect future borrowing.
- Maintain supporting records. Presumptive taxation simplifies profit computation; it does not remove the need to support turnover, receipts, vehicle details or bank deposits.
Final takeaway
Section 58 brings the presumptive schemes for eligible businesses, goods carriage and specified professions into one provision under the Income-tax Act, 2025. The main task for taxpayers is to identify the correct category and then check its eligibility, threshold, income calculation, audit conditions and payment rules.
The scheme can make tax computation simpler, but it is not a universal tax-saving option. In particular, business owners should think carefully about the five-year restriction, and every taxpayer should compare presumptive income with actual profits before choosing a method.
