Presumptive Taxation — Section 58

A complete guide to presumptive taxation under Section 58 of the Income Tax Act 2025 — simplified income computation for small businesses (6%/8%), goods carriage operators, and specified professionals (50%). Conditions, limits, turnover thresholds, exit rules, advance tax, and worked examples.

📘 Section: 58 — Special provision for computing profits and gains of business or profession on presumptive basis
🔄 Replaces: Sections 44AD (small business), 44ADA (professionals), 44AE (goods carriage) of the Income Tax Act 1961
📅 Effective: 1st April 2026 (Tax Year 2026-27 onwards)

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All five conditions must be satisfied simultaneously:

Deemed Profit = Higher of:
  (A) 6% of digital/banking receipts
      + 8% of cash receipts
  OR
  (B) Profit actually earned (if higher than A)

What counts as "digital/banking receipts" for the 6% rate?

Any amount received through specified banking or online mode during the tax year OR received before the due date of filing the ITR under Section 263(1) in respect of that tax year. This means payments received via NEFT, RTGS, UPI, account payee cheque, debit/credit card, net banking all qualify for the lower 6% rate.

Any assessee engaged in the business of plying, hiring, or leasing goods carriages who owns not more than 10 goods carriages at any time during the tax year. No turnover limit. No restriction on assessee type (any assessee — individual, company, firm etc.).

Ownership includes hire purchase: An assessee in possession of a goods carriage under hire purchase (where part payment is still outstanding) is deemed to be the owner [Section 58(11)(f)].

Firm deducting partner's salary/interest [Section 58(5)]: Where the assessee is a firm, the salary and interest paid to partners (within limits of Section 35(e)) shall be deducted from the income computed under Section 58(2)(Sl. 2). This is a special provision — partner remuneration is deductible even under the presumptive scheme for goods carriage firms.

Resident Individual or Firm (not LLP) carrying on a specified profession under Section 62(4).

Deemed Profit = Higher of: 50% of Gross Receipts OR Actual profit

5-Year Lock-in for Small Business (Sl. No. 1)

Where an eligible assessee (Sl. No. 1 — small business) declares income under Section 58 for a tax year, and then declares income lower than the prescribed rate in any of the 5 succeeding years:

• The assessee becomes ineligible to claim presumptive taxation for 5 years subsequent to the year of violation
• During those 5 barred years — must maintain books (Section 62) and get tax audit (Section 63) if income exceeds basic exemption

Example: A trader opts for presumptive in FY 2026-27. In FY 2028-29 (within 5 years), declares actual profit lower than 8% without getting audit. From FY 2029-30 to 2033-34 (5 years), cannot use presumptive scheme — must maintain full books.

Note: This exit rule applies only to Sl. No. 1 (small business). Sl. No. 2 (goods carriage) and Sl. No. 3 (professions) can exit in any year by maintaining books and declaring actual profit with audit.

Example 1 — Small Business (Sl. No. 1): Mixed Cash & Digital

Mr. Rajan, a resident trader. FY 2026-27 turnover = ₹1.8 crore. Of this, ₹1.2 crore received digitally/by banking, ₹60 lakh received in cash. Actual profit = ₹10 lakh.

Computation	Amount
6% of digital receipts: 6% × ₹1.2 crore	₹7,20,000
8% of cash receipts: 8% × ₹60L	₹4,80,000
Deemed profit (A)	₹12,00,000
Actual profit (B)	₹10,00,000
Taxable income under Sec 58 = Higher of A and B	₹12,00,000

Note: Rajan can opt for presumptive since turnover ≤ ₹2 crore. He is an eligible assessee — resident individual, no SEZ/commission/agency income.

Example 2 — Goods Carriage (Sl. No. 2)

Mr. Suresh owns 3 trucks: (1) HGV of 20 ton GVW (owned all 12 months), (2) HGV of 16 ton GVW (owned 8 months), (3) Light truck — non-heavy (owned all 12 months). Actual profit declared = ₹5 lakh.

Vehicle	Deemed Income
Truck 1: ₹1,000 × 20 ton × 12 months	₹2,40,000
Truck 2: ₹1,000 × 16 ton × 8 months	₹1,28,000
Truck 3: ₹7,500 × 12 months	₹90,000
Total deemed income (A)	₹4,58,000
Actual profit (B)	₹5,00,000
Taxable income = Higher of A and B	₹5,00,000

Example 3 — Professional (Sl. No. 3)

Dr. Priya, a resident doctor. FY 2026-27 gross receipts = ₹45 lakh. Actual expenses = ₹30 lakh. All receipts via digital mode.

Computation	Amount
Deemed profit: 50% × ₹45L	₹22,50,000
Actual profit: ₹45L − ₹30L	₹15,00,000
Taxable income (higher of two)	₹22,50,000

Dr. Priya can opt as gross receipts ≤ ₹50L. She pays no advance tax until 15th March. No books, no audit. But her taxable income is ₹22.5L — higher than actual profit of ₹15L. She may reconsider if actual expenses are very high.

📖 Business Income — Complete Series

📌 Source: Income Tax Act 2025, Act No. 30 of 2025 — Section 58 (pages 82–83), as published in the Gazette of India Extraordinary dated 21st August 2025. Use the Section Cross-Reference tool to map 1961 Act sections to 2025 Act equivalents.