Taxation · Profits and Gains of Business or Profession

Presumptive Taxation Schemes for Business, Professions and Goods Carriages

Updated 5 October 2026

Presumptive taxation lets small taxpayers declare income at a fixed percentage of turnover instead of keeping full books. Eligible business is taxed at 8% of turnover (6% for turnover received by account payee cheque, bank draft or prescribed electronic modes), specified professionals at 50% of gross receipts, and goods carriage owners at a fixed amount per vehicle per month. Check eligibility, apply the rate, then add other income.

Understand Presumptive Taxation Schemes

Normal business income needs books, a profit and loss account and often a tax audit. That is heavy for a small shopkeeper, a doctor or a truck owner. The presumptive schemes remove that burden. The law simply presumes your profit is a fixed share of your turnover or receipts. You do not claim expenses, and you need not prove your actual profit.

There are three schemes. The first is for eligible business (small traders and similar businesses). The second is for specified professions such as legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, film artists, company secretaries and IT professionals. The third is for goods carriages (trucks and similar vehicles). It is open to any assessee engaged in plying, hiring or leasing goods carriages, if the assessee owns not more than 10 goods carriages at any time in the tax year.

In the eligible business scheme, the deemed profit is 8% of total turnover. It drops to 6% for the part received by account payee cheque, account payee bank draft or prescribed electronic modes (such as ECS or UPI) before the due date for filing the return. The rest stays at 8%. The professional scheme deems 50% of gross receipts as profit. The goods carriage scheme has no turnover test. Income depends on the number of vehicles and months owned, and the tonnage for heavy vehicles.

The deemed profit is treated as the full income from that business or profession. The deduction for normal expenses and depreciation is treated as already allowed, so you do not claim them separately. The written down value of assets is adjusted as if depreciation had been claimed. If you declare a lower profit than the presumptive rate and your total income is above the maximum amount not chargeable to tax, you must keep books and get a tax audit.

Advance tax is simpler for two of the schemes. If you use the eligible business scheme or the specified professions scheme, you may pay the whole advance tax in one instalment on or before 15 March of the tax year. Goods carriage owners are not covered by this relief. They pay advance tax in the normal instalments.

Key rules to remember

Eligible business: who can use it: Resident individual, HUF or partnership firm (not LLP); not claiming specified profit-linked deductions; Agency business and commission or brokerage business are excluded. Business of plying, hiring or leasing goods carriages falls under the goods carriage scheme instead. Non-residents and companies are not eligible.
Eligible business: turnover limit: Up to ₹2,00,00,000; up to ₹3,00,00,000 only if cash receipts do not exceed 5% of total turnover and cash payments do not exceed 5% of total payments; The higher limit needs both conditions to be met. If either fails, the limit is ₹2,00,00,000. Check both in the question carefully.
Eligible business: deemed profit: 8% of total turnover; 6% of turnover received by account payee cheque, account payee bank draft or prescribed electronic modes before the due date for filing return; Work out cash and other turnover separately at 8%, digital turnover at 6%, then add the two. A lower profit needs books and audit if total income exceeds the maximum amount not chargeable to tax.
Specified professions: who and limit: Resident individual or partnership firm (not LLP, not HUF); gross receipts up to ₹50,00,000; up to ₹75,00,000 only if cash receipts do not exceed 5% of gross receipts and cash payments do not exceed 5% of total payments; Profession must be a specified one. Other professions do not qualify. The higher limit needs both cash conditions to be met, as for business.
Specified professions: deemed profit: Deemed profit = 50% of gross receipts; A higher profit may be declared. A lower profit needs books and audit if total income exceeds the maximum amount not chargeable to tax.
Goods carriages: eligibility: Any assessee engaged in the business of plying, hiring or leasing goods carriages, owning not more than 10 goods carriages at any time in the tax year; This scheme is not limited to a particular type of person. The two tests are the activity (plying, hiring or leasing goods carriages) and the vehicle count. Owning more than 10 goods carriages at any time in the year means you fail the eligibility test, so the scheme is not available for any of your vehicles.
Goods carriages: heavy vehicle (gross weight above 12,000 kg): Income per vehicle = ₹1,000 × tonnes of gross vehicle weight × months owned; Use the gross vehicle weight in tonnes, not the unladen weight and not the load actually carried. Part of a month counts as a full month. Declaring a lower income needs books and audit if total income exceeds the maximum amount not chargeable to tax.
Goods carriages: other vehicle: Income per vehicle = ₹7,500 × months owned; Part of a month counts as a full month. Declaring a lower income needs books and audit if total income exceeds the maximum amount not chargeable to tax.
Partners of a firm: Firm income = deemed profit − partner salary and interest allowed within the limits; Partner salary and interest are deducted from the presumptive income of a firm only where the scheme allows it, and only within the limits. Follow the facts given in the question. The firm cannot claim any other expense.
Advance tax: Eligible business and specified professions: one instalment on or before 15 March. Goods carriage owners: normal advance tax instalments; The single 15 March instalment is available only under the eligible business and specified professions schemes. Goods carriage owners are not covered by it.

How to solve Presumptive Taxation Schemes questions

Use this order for any presumptive taxation question. Most marks go for correct eligibility and the right rate.

1Identify the assessee: individual, HUF, firm, LLP, company. Confirm residential status.
2Identify the activity: ordinary business, specified profession, or plying, hiring or leasing goods carriages. Exclude agency or commission business from the business scheme. For goods carriages, any assessee can use the scheme if it is engaged in that activity and owns not more than 10 goods carriages at any time in the year.
3Test the limit: for business, compare turnover with ₹2 crore or ₹3 crore after the cash tests (cash receipts and cash payments each within 5%). For professions, compare gross receipts with ₹50 lakh or ₹75 lakh after the same cash tests. For goods carriages, count vehicles owned at any time (maximum 10).
4Split receipts into digital (account payee cheque, account payee bank draft or prescribed electronic modes, received before the due date for filing return) and cash or other receipts.
5Apply the rates: 6% or 8% of turnover for business; 50% of gross receipts for professions; the per-vehicle monthly amounts for goods carriages, counting part months as full months.
6For a firm, deduct partner salary and interest within the limits where the scheme allows it. Do not deduct any other expense or depreciation.
7Add income from other heads and other businesses. Apply the tax rates and check if books and tax audit are triggered by declaring income below the presumptive amount under any of the three schemes.
8State advance tax: a single instalment by 15 March for eligible business and specified professions. For goods carriage owners, state that the normal advance tax instalments apply.

Quickest way: Three-line check for MCQs and written answers

When to use it: Use it when time is short, especially in 1- and 2-mark MCQs and 5-mark written questions.

MCQs: first check who is eligible. A company, an LLP, or an agent is almost always the wrong option for the business scheme. HUF is eligible for business but not for professions.
Then check the limits and the cash tests (receipts and payments each within 5%). If either fails, use ₹2 crore or ₹50 lakh. Wrong-limit options are the common traps.
Compute: 8% on cash, 6% on digital; 50% for professionals; ₹1,000 per tonne of gross vehicle weight per month or ₹7,500 per month for trucks.
Written format that earns step marks: (1) eligibility with reasons, (2) split of receipts, (3) computation, (4) conclusion with advance tax or audit remark. Write the rate next to every figure.

Common mistakes in Presumptive Taxation Schemes

Applying 8% to the entire turnover when part is received digitally
Students remember 8% and forget the 6% concession.
Fix: Always split turnover into digital and other receipts. Use 6% on the digital part and 8% on the rest.
Claiming expenses and depreciation on top of the deemed profit
Habit from normal business income computation.
Fix: Under the presumptive scheme, expenses and depreciation are treated as already allowed. For a firm, only partner salary and interest are deducted, within limits and where the scheme allows it.
Allowing LLPs, companies or HUFs for professions
Mixing up the eligible persons across the schemes.
Fix: Business: resident individual, HUF, firm (not LLP). Profession: resident individual or firm (not LLP). Goods carriage: any assessee engaged in plying, hiring or leasing goods carriages can use it, provided it owns not more than 10 goods carriages at any time in the year.
Using the higher limit (₹3 crore or ₹75 lakh) without testing the cash conditions
Students read only the turnover and ignore the cash receipts and cash payments.
Fix: Compute cash receipts as a percentage of total turnover or gross receipts, and cash payments as a percentage of total payments. Use the higher limit only if both are within 5%, for business and for professions.
Counting only full months for goods carriages, or using the wrong weight for heavy vehicles
Students treat the monthly rate like a time-apportioned amount, and take "tonnage" to mean the goods carried or the unladen weight.
Fix: Part of a month counts as a full month. For heavy vehicles, use the gross vehicle weight in tonnes, not the unladen weight and not the load actually carried.
Forgetting audit and books when declaring lower than the presumptive profit
Students think the scheme is a trap-free option.
Fix: Under all three schemes (business, professions and goods carriages), declaring income lower than the presumptive amount needs books and a tax audit if total income is above the maximum amount not chargeable to tax. Mention this in the answer.
Giving the single 15 March advance tax instalment to goods carriage owners
Students assume the relief applies to all three presumptive schemes.
Fix: The single instalment is for eligible business and specified professions only. Goods carriage owners pay advance tax in the normal instalments.

Worked examples

Example 1

Ravi, a resident individual, runs a trading business. In the tax year 2026-27 his total turnover is ₹1,80,00,000. Of this, ₹60,00,000 was received in cash and ₹1,20,00,000 by account payee cheque before the due date of filing the return. Compute his income from business under the presumptive scheme.

Show the solution

Eligibility: Ravi is a resident individual running an ordinary business, so the scheme is available.
Cash receipts are ₹60,00,000 ÷ ₹1,80,00,000 = 33.33%, which is above 5%. So the limit is ₹2,00,00,000.
Turnover of ₹1,80,00,000 is within ₹2,00,00,000, so he is eligible.
Digital part: 6% × ₹1,20,00,000 = ₹7,20,000.
Cash part: 8% × ₹60,00,000 = ₹4,80,000.
Total deemed profit = ₹7,20,000 + ₹4,80,000 = ₹12,00,000.

Answer: Income from business is ₹12,00,000. No separate deduction for expenses or depreciation. Advance tax is payable in one instalment by 15 March.

Example 2

Meera, a resident individual, owned three heavy goods vehicles, each with gross vehicle weight of 15 tonnes, for the whole tax year. She also owned two light goods vehicles. One light vehicle was owned the whole year. The other was bought on 10 October and used until 31 March. Compute her income from goods carriages under the presumptive scheme.

Show the solution

Eligibility: Meera plies goods carriages and total vehicles are 5, which is not more than 10 at any time, so the scheme applies.
Heavy vehicles: 15 tonnes × ₹1,000 × 12 months = ₹1,80,000 per vehicle.
For three heavy vehicles: 3 × ₹1,80,000 = ₹5,40,000.
Light vehicle owned all year: ₹7,500 × 12 = ₹90,000.
Light vehicle bought 10 October: months are October (part counts as full), plus November to March (5 months) = 6 months. ₹7,500 × 6 = ₹45,000.
Total = ₹5,40,000 + ₹90,000 + ₹45,000 = ₹6,75,000.

Answer: Income from goods carriages is ₹6,75,000. No other expense or depreciation is allowed. Advance tax follows the normal instalments, because the single 15 March instalment is not available to goods carriage owners.

Exam tips

Start every answer with an eligibility line. Examiners award marks for stating who is eligible and why.
Read the cash figures carefully. Questions often give cash receipts or cash payments to test the 5% conditions for the higher limit.
In the goods carriage questions, list vehicles in a small table: type, months, rate, income. It protects step marks.
State advance tax at the end: a single instalment by 15 March for eligible business and specified professions. For goods carriage owners, say the normal instalments apply.
Do not use sections of the Income-tax Act, 1961. Use the Income-tax Act, 2025 terms: tax year, not assessment year.

Practice questions from Profits and Gains of Business or Profession

Presumptive Taxation Schemes: frequently asked questions

What is the difference between the presumptive scheme for business and for professions?

The business scheme applies to ordinary business and deems 8% (or 6% for turnover received by account payee cheque, bank draft or prescribed electronic modes) of turnover as profit. The professional scheme applies only to specified professions and deems 50% of gross receipts as profit. HUFs can use the business scheme but not the professional scheme.

Can I claim expenses under the presumptive scheme?

No. The deemed profit is your full business income and expenses and depreciation are treated as already allowed. A firm can still deduct partner salary and interest within the limits, where the scheme allows it.

When is audit required under presumptive taxation?

Under all three schemes (business, professions and goods carriages), if you declare income lower than the presumptive amount and your total income exceeds the maximum amount not chargeable to tax, you must keep books and get a tax audit. If you declare at or above the presumptive amount, you need not.

When is advance tax paid under presumptive taxation?

Taxpayers under the eligible business scheme and the specified professions scheme may pay the full advance tax in a single instalment on or before 15 March of the tax year. Goods carriage owners are not covered by this relief and pay advance tax in the normal instalments.