{"id":17867,"date":"2026-04-01T17:38:24","date_gmt":"2026-04-01T12:08:24","guid":{"rendered":"https:\/\/fastlegal.co.in\/blog\/uncategorized\/new-income-tax-act-section-58-presumptive-taxation-basics-for-indian-small-businesses\/"},"modified":"2026-04-01T17:38:24","modified_gmt":"2026-04-01T12:08:24","slug":"new-income-tax-act-section-58-presumptive-taxation-basics-for-indian-small-businesses","status":"publish","type":"post","link":"https:\/\/fastlegal.co.in\/blog\/business\/new-income-tax-act-section-58-presumptive-taxation-basics-for-indian-small-businesses\/","title":{"rendered":"New Income Tax Act Section 58: presumptive taxation basics for Indian small businesses"},"content":{"rendered":"<p>The new Income Tax Act keeps the concept of **presumptive taxation** but organises it under **Section 58 \u2013 Special provision for computing profits and gains of business or profession on presumptive basis in case of certain residents**.<\/p>\n<p>For small businesses and professionals, Section 58 is important because it offers a simpler way to compute taxable income, reduce paperwork and sometimes lower the risk of scrutiny\u2014provided you understand the rules and limits.<\/p>\n<p>This guide explains Section 58 in plain language for Indian founders, freelancers and small business owners.<\/p>\n<p>> Disclaimer: This article is for general information only and is based on the draft\/available text of Section 58 at the time of writing. Please consult your CA and the final notified law and rules before taking any decisions.<\/p>\n<h2>1. What is presumptive taxation under Section 58?<\/h2>\n<p>Normally, business and professional income is calculated by:<\/p>\n<ul>\n<li>maintaining full books of account,<\/li>\n<li>tracking all expenses and depreciation, and<\/li>\n<li>computing net profit as per sections 26 to 54 (normal computation rules).<\/li>\n<\/ul>\n<p>Section 58 allows **certain residents** to instead pay tax on a **presumed profit** calculated as a fixed percentage or fixed amount, without claiming individual expenses.<\/p>\n<p>When you opt for Section 58 for an eligible business or profession:<\/p>\n<ul>\n<li>your **presumptive profit is deemed to be your taxable profit**, and<\/li>\n<li>the usual computation provisions (sections 26\u201354) **do not apply** to that business to the extent they conflict with Section 58.<\/li>\n<\/ul>\n<h2>2. Who can use Section 58 presumptive scheme?<\/h2>\n<p>Section 58 covers three categories of activities (for **residents only**):<\/p>\n<p>1. **Eligible small businesses** (other than goods carriage business).<\/p>\n<p>2. **Business of plying, hiring or leasing goods carriages**.<\/p>\n<p>3. **Specified professions** (like legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration and other notified professions).<\/p>\n<p>The section also defines two key terms:<\/p>\n<ul>\n<li>**Eligible assessee** \u2013 resident individual \/ HUF \/ firm (not LLP) who:<\/li>\n<li>does not claim certain specified deductions,<\/li>\n<li>does not carry on a specified profession (for business presumptive),<\/li>\n<li>does not earn commission or brokerage income, and<\/li>\n<li>does not run an agency business.<\/li>\n<\/ul>\n<ul>\n<li>**Specified assessee** \u2013 resident individual or firm (not LLP) eligible for presumptive **profession**.<\/li>\n<\/ul>\n<h2>3. Presumptive scheme for small businesses (Section 58 Table, Sl. No. 1)<\/h2>\n<p>This is the successor of the old **Section 44AD** concept.<\/p>\n<h3>3.1 Turnover limits<\/h3>\n<p>You can use the presumptive scheme for **&#8221;any business&#8221;** (other than goods carriage business) if you are an **eligible assessee** and your **total turnover\/gross receipts** in the tax year:<\/p>\n<ul>\n<li>**do not exceed \u20b92 crore**, or<\/li>\n<li>**do not exceed \u20b93 crore**, where **cash receipts are up to 5%** of total turnover\/gross receipts.<\/li>\n<\/ul>\n<p>In simple terms:<\/p>\n<ul>\n<li>If almost all your receipts are via banking channels \/ digital (cash \u2264 5%), the turnover limit is **\u20b93 crore**.<\/li>\n<li>If you have more cash receipts, the lower limit of **\u20b92 crore** applies.<\/li>\n<\/ul>\n<h3>3.2 How profit is computed<\/h3>\n<p>Your presumptive profit is the higher of:<\/p>\n<p>1. **6%** of turnover\/receipts that are **received through banking\/online modes** during the year or before the due date for filing the return; **plus**<\/p>\n<p>2. **8%** of the remaining turnover\/receipts (i.e. not covered in point 1);<\/p>\n<p>**OR**<\/p>\n<p>3. The **profit you actually claim to have earned**, if that is higher.<\/p>\n<p>So effectively:<\/p>\n<ul>\n<li>Digital receipts \u2192 presumptive rate **6%**.<\/li>\n<li>Other receipts (typically cash) \u2192 presumptive rate **8%**.<\/li>\n<\/ul>\n<h3>3.3 Practical example<\/h3>\n<p>Assume a small trading business with:<\/p>\n<ul>\n<li>Total turnover: **\u20b92.5 crore**.<\/li>\n<li>Receipts through bank\/online: **\u20b92.4 crore**.<\/li>\n<li>Cash receipts: **\u20b910 lakh**.<\/li>\n<\/ul>\n<p>Cash receipts are **4%** of turnover (\u20b910 lakh \/ \u20b92.5 crore), so the higher **\u20b93 crore** limit applies and Section 58 presumptive is available.<\/p>\n<p>Presumptive profit would be:<\/p>\n<ul>\n<li>6% of \u20b92.4 crore = **\u20b914.4 lakh**; plus<\/li>\n<li>8% of \u20b910 lakh = **\u20b90.8 lakh**.<\/li>\n<\/ul>\n<p>Total presumptive profit = **\u20b915.2 lakh**.<\/p>\n<p>You pay tax on \u20b915.2 lakh (subject to other income, slab rate, etc.) without separately claiming expenses.<\/p>\n<h2>4. Goods carriage business (Section 58 Table, Sl. No. 2)<\/h2>\n<p>This is the successor of old **Section 44AE**.<\/p>\n<h3>4.1 Who can use it?<\/h3>\n<ul>\n<li>Any **resident assessee** (individual or firm, etc.) who **owns not more than 10 goods carriages at any time** during the tax year.<\/li>\n<li>Ownership includes vehicles taken on **hire purchase or instalments** where payment is still due.<\/li>\n<\/ul>\n<h3>4.2 How profit is computed<\/h3>\n<p>Presumptive income is the aggregate of:<\/p>\n<ul>\n<li>For each **heavy goods vehicle** (gross vehicle weight > 12,000 kg):<\/li>\n<li>**\u20b91,000 per ton** of gross vehicle weight or unladen weight, **per month or part of a month** of ownership in the year.<\/li>\n<li>For each **other goods carriage**:<\/li>\n<li>**\u20b97,500 per month** or part of a month of ownership.<\/li>\n<\/ul>\n<p>**OR** the **actual higher profit** claimed by the assessee.<\/p>\n<h3>4.3 Firms \u2013 deduction for partner salary and interest<\/h3>\n<p>Where the assessee is a **firm**, Section 58 allows deduction of:<\/p>\n<ul>\n<li>**salary and interest to partners** from the presumptive income,<\/li>\n<li>subject to conditions and limits of the partnership deduction rule (corresponding to section 35(e) in the new Act).<\/li>\n<\/ul>\n<h2>5. Presumptive scheme for specified professions (Section 58 Table, Sl. No. 3)<\/h2>\n<p>This corresponds broadly to old **Section 44ADA**.<\/p>\n<h3>5.1 Who is covered?<\/h3>\n<ul>\n<li>**Specified professions** as defined in Section 62(4) \u2013 typically legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration and other notified professions.<\/li>\n<li>**Specified assessee** \u2013 resident individual or firm (not LLP).<\/li>\n<\/ul>\n<h3>5.2 Gross receipts limits<\/h3>\n<p>You can use Section 58 presumptive for specified professions if your **gross receipts** in the tax year:<\/p>\n<ul>\n<li>**do not exceed \u20b950 lakh**, or<\/li>\n<li>**do not exceed \u20b975 lakh**, where **cash receipts are up to 5%** of gross receipts.<\/li>\n<\/ul>\n<h3>5.3 How profit is computed<\/h3>\n<p>Presumptive profit = the higher of:<\/p>\n<ul>\n<li>**50% of gross receipts**, or<\/li>\n<li>**actual profit claimed**.<\/li>\n<\/ul>\n<p>If a professional wants to declare profit **less than 50%**, and total income exceeds the basic exemption limit, they must keep books and get them audited (see next section).<\/p>\n<h2>6. What if actual profit is lower than presumptive?<\/h2>\n<p>Section 58(3) says that any assessee in the table who:<\/p>\n<ul>\n<li>claims that **actual profit is lower than presumptive**, **and**<\/li>\n<li>has **total income exceeding the basic exemption limit**, must:<\/li>\n<\/ul>\n<p>1. **Maintain books of account** as per Section 62; and<\/p>\n<p>2. **Get accounts audited** and obtain\/file audit report as per Section 63.<\/p>\n<p>In other words, if you want to declare a lower margin than the presumptive percentage, and your income is taxable, you have to follow **full books + audit**.<\/p>\n<h2>7. No extra deductions against presumptive income<\/h2>\n<p>Under Section 58(4):<\/p>\n<p>> Any loss, allowance or deduction allowable elsewhere in the Act **cannot be claimed separately** against presumptive income computed under Section 58(2).<\/p>\n<p>So you **cannot**:<\/p>\n<ul>\n<li>claim depreciation separately,<\/li>\n<li>set off additional business losses or allowances **against the presumptive income of that business**.<\/li>\n<\/ul>\n<p>However, rules on set-off of losses from other heads (for example, capital loss) still depend on the general provisions of the Act.<\/p>\n<h2>8. Lock-in and consequences of opting out (for business presumptive)<\/h2>\n<p>Section 58(7) introduces a **five\u2011year lock-in** rule similar to the old law for business presumptive.<\/p>\n<ul>\n<li>If an **eligible assessee** declares profit under presumptive business scheme (Sl. No. 1) for a tax year, but **declares profit under normal computation for any of the next five tax years**, then:<\/li>\n<li>they **cannot claim presumptive benefit again** for **five tax years** after the year in which they opted out.<\/li>\n<\/ul>\n<p>Further, Section 58(8) says that where this lock\u2011in applies and total income exceeds the basic exemption limit, the assessee **must maintain books and get them audited**.<\/p>\n<h2>9. Cash vs non\u2011cash receipts \u2013 important clarification<\/h2>\n<p>For business (Sl. No. 1) and profession (Sl. No. 3) turnover limits and 5% cash test:<\/p>\n<ul>\n<li>any receipt by **cheque or bank draft that is *not account payee*** is treated as **cash receipt**.<\/li>\n<\/ul>\n<p>This is important because using non\u2011account\u2011payee cheques can:<\/p>\n<ul>\n<li>increase your \u201ccash receipts\u201d percentage,<\/li>\n<li>potentially push you **over the 5% limit**, and<\/li>\n<li>reduce your eligibility for the higher turnover caps (\u20b93 crore \/ \u20b975 lakh).<\/li>\n<\/ul>\n<h2>10. Books and audit relaxation for goods carriage presumptive<\/h2>\n<p>For the goods carriage business (Sl. No. 2), Section 58(10) provides that:<\/p>\n<ul>\n<li>the general **books and audit provisions (Sections 62 and 63)** do **not apply** to that presumptive business, and<\/li>\n<li>while checking monetary limits under Sections 62 and 63, **gross receipts\/income from this presumptive transport business are excluded**.<\/li>\n<\/ul>\n<p>This is meant to keep compliance simpler for small transporters using the fixed-amount presumptive scheme.<\/p>\n<h2>11. Key takeaways for founders and small businesses<\/h2>\n<p>1. **Choose the right scheme:**<\/p>\n<ul>\n<li>Trading, manufacturing, services \u2192 consider presumptive business scheme (6%\/8%) if within turnover &#038; cash limits.<\/li>\n<li>Goods vehicles \u2192 consider fixed per\u2011vehicle presumptive.<\/li>\n<li>Professionals \u2192 consider 50% presumptive if within receipts &#038; cash limits.<\/li>\n<\/ul>\n<p>2. **Mind the 5% cash ceiling:**<\/p>\n<ul>\n<li>To access higher limits (\u20b93 crore \/ \u20b975 lakh), keep cash receipts **within 5%** of turnover\/receipts.<\/li>\n<\/ul>\n<p>3. **Think before opting out:**<\/p>\n<ul>\n<li>Once you move away from presumptive for business, you may be **locked out for five years**.<\/li>\n<\/ul>\n<p>4. **No extra deductions:**<\/p>\n<ul>\n<li>Under presumptive, you trade off detailed expense deductions for **simplicity and certainty**.<\/li>\n<\/ul>\n<p>5. **Work with your CA:**<\/p>\n<ul>\n<li>Before choosing presumptive vs regular taxation under the new Act, run the numbers for at least **2\u20133 years ahead** (turnover growth, margins, cash vs digital mix, audit thresholds).<\/li>\n<\/ul>\n<p>Handled properly, Section 58 can reduce compliance burden for genuine small businesses and professionals, while giving the tax department a simple and predictable profit baseline.<\/p>\n<p>Related: New Income Tax Act TDS provisions: practical guide for Indian businesses (Section 393) (link: \/blog\/new-income-tax-act-tds-provisions-practical-guide-indian-businesses-section-393)<\/p>\n<p>Related: New Income Tax Act for small businesses in India \u2013 structure, key provisions and compliance (link: \/blog\/new-income-tax-act-small-businesses-india-overview)<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The new Income Tax Act keeps the concept of **presumptive taxation** but organises it under **Section 58 \u2013 Special provision for computing profits and gains of business or profession on presumptive basis in case of certain residents**. For small businesses&hellip; <a href=\"https:\/\/fastlegal.co.in\/blog\/business\/new-income-tax-act-section-58-presumptive-taxation-basics-for-indian-small-businesses\/\" class=\"more-link\">Continue Reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7146],"tags":[],"class_list":["post-17867","post","type-post","status-publish","format-standard","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/fastlegal.co.in\/blog\/wp-json\/wp\/v2\/posts\/17867","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fastlegal.co.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fastlegal.co.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fastlegal.co.in\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fastlegal.co.in\/blog\/wp-json\/wp\/v2\/comments?post=17867"}],"version-history":[{"count":0,"href":"https:\/\/fastlegal.co.in\/blog\/wp-json\/wp\/v2\/posts\/17867\/revisions"}],"wp:attachment":[{"href":"https:\/\/fastlegal.co.in\/blog\/wp-json\/wp\/v2\/media?parent=17867"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fastlegal.co.in\/blog\/wp-json\/wp\/v2\/categories?post=17867"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fastlegal.co.in\/blog\/wp-json\/wp\/v2\/tags?post=17867"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}