Direct and Indirect Taxation · Profits and Gains of Business or Profession

Presumptive Taxation under Section 58 of Income-tax Act 2025

Updated 10 October 2026 · Fact-checked

Presumptive taxation lets eligible small taxpayers declare profit at a fixed percentage of turnover or receipts instead of keeping full books. Under section 58 of the Income-tax Act, 2025, you find the category, check the turnover limit and cash condition, apply the rate, and compare with actual profit if higher.

Understand Special Business Provisions and Presumptive Taxation

Normal business income needs books, a profit and loss account, and many allowances and disallowances. For a small trader or professional this is costly. A presumptive scheme removes this burden. The law presumes your profit is a fixed share of your turnover or gross receipts. You pay tax on that deemed profit.

Section 58 of the Income-tax Act, 2025 has three categories in its table. Serial 1 covers any business other than goods carriage business. Serial 2 covers plying, hiring or leasing goods carriages. Serial 3 covers specified professions referred to in section 62(4).

Each category has its own assessee and its own limit. Serial 1 is open to an eligible assessee: a resident individual, HUF or firm other than an LLP, who has not claimed deduction under Chapter VIII-C for the tax year, does not carry on a specified profession, earns no commission or brokerage income, and does not carry on agency business. Serial 3 is open to a specified assessee: a resident individual or firm other than an LLP. Serial 2 applies to an assessee who owns not more than ten goods carriages at any time in the tax year. A person in possession of a goods carriage under hire purchase or instalments, with any amount still due, is deemed the owner (sub-section (11)(f)).

The computed profit is deemed to be your business profit. Under sub-section (4), no loss, allowance or deduction is allowed against it. Depreciation is deemed claimed and allowed, so the written down value falls each year (sub-section (6)). If you claim a lower profit than the presumptive profit and your total income exceeds the maximum amount not chargeable to tax, you must keep books under section 62 and get an audit under section 63 (sub-section (3)).

In the 2025 Act, the Section 61 scheme is different. It applies to certain non-residents such as shipping, aircraft and oil-services businesses, at fixed percentages of specified receipts. Do not mix it up with section 58, which is for residents.

Key rules to remember

Serial 1: general business, turnover limit: Turnover ≤ ₹2,00,00,000; or ≤ ₹3,00,00,000 if cash receipts ≤ 5% of total turnover; Cash includes non-account-payee cheques or drafts (sub-section (9)).
Serial 1: presumptive profit: (6% × turnover received by specified banking or online mode by the due date under section 263(1)) + (8% × remaining turnover); or actual profit, whichever is higher; Digital receipts get 6%. All other turnover gets 8%.
Serial 3: profession, receipts limit: Gross receipts ≤ ₹50,00,000; or ≤ ₹75,00,000 if cash receipts ≤ 5% of gross receipts; Assessee must be a resident individual or firm other than an LLP.
Serial 3: presumptive profit: 50% × gross receipts; or actual profit, whichever is higher; Applies to the specified profession in section 62(4).
Serial 2: heavy goods vehicle (gross weight over 12,000 kg): ₹1,000 × tons of gross vehicle weight or unladen weight × months or part months owned; Owner must own not more than ten goods carriages at any time in the tax year.
Serial 2: other goods carriage: ₹7,500 × number of vehicles × months or part months owned; Compare with actual profit claimed; the higher applies.
Firm partners: Firm income = presumptive profit − partners' salary and interest (within section 35(e) limits); Sub-section (5) allows this deduction for serial 2 firms.
Opt-out lock-in: If you declare lower profit in any of the next five tax years, you lose the scheme for five tax years after the default year; Sub-section (7) applies to serial 1; audit follows if total income exceeds the basic exemption (sub-section (8)).

How to solve Special Business Provisions and Presumptive Taxation questions

Use the same sequence for every question on this topic.

1Identify the category: general business (serial 1), goods carriage (serial 2) or specified profession (serial 3).
2Check the assessee: resident individual, HUF or firm other than an LLP; for serial 1 also check the exclusions such as commission, brokerage, agency business and Chapter VIII-C deduction.
3Test the limit. Compute cash receipts as a percentage of total turnover. Treat non-account-payee cheques or drafts as cash.
4Split turnover into digital receipts (6%) and other receipts (8%) for serial 1. For a profession take 50% of gross receipts. For goods carriage apply the monthly rates.
5Compute the presumptive profit and compare with the actual profit claimed, if given. Take the higher.
6Do not deduct any expense, allowance or loss from this profit. The only exception is a firm under serial 2 (goods carriage): partner salary and interest is deducted under sub-section (5), within the section 35(e) limits.
7Check the audit and books condition if the assessee claims lower profit and total income exceeds the basic exemption.
8Write the final business income and carry it into total income.

Quickest way: Three-line turnover split

When to use it: Serial 1 numerical questions with mixed digital and cash turnover.

Compute 8% of total turnover, then subtract 2% of the digitally received turnover (that is, 6% on digital plus 8% on the rest). For Ramesh Traders this gives ₹14,40,000 − ₹2,40,000 = ₹12,00,000.
Check the cash ratio against 5% before choosing the ₹2 crore or ₹3 crore limit.
State the higher-of test in one line: presumptive profit versus actual profit.

Common mistakes in Special Business Provisions and Presumptive Taxation

Applying 6% to all turnover
Students remember only the lower rate.
Fix: Apply 6% only to turnover received by specified banking or online mode by the due date under section 263(1). The rest is 8%.
Using the ₹3 crore limit without testing cash
The higher limit looks like the main limit.
Fix: Cash must not exceed 5% of turnover. If it does, the limit is ₹2 crore.
Deducting expenses or depreciation from presumptive profit
Habit from normal business computation.
Fix: Sub-section (4) bars any loss, allowance or deduction. Depreciation is only deemed allowed for WDV purposes.
Ignoring non-account-payee cheques
Students treat any bank receipt as non-cash.
Fix: Under sub-section (9), such cheques or drafts are deemed cash for serials 1 and 3.
Allowing serial 1 to a commission agent or a specified professional
Only the turnover limit is checked.
Fix: Check the eligible assessee definition. Commission, brokerage, agency business and specified professions are excluded from serial 1.
Confusing section 58 with section 61
Both are presumptive.
Fix: Section 58 is for residents. Section 61 is for specified non-residents at fixed percentages of specified receipts.

Worked examples

Example 1

Ramesh Traders, a resident proprietorship in Pune, has turnover of ₹1,80,00,000 for tax year 2026-27. Of this, ₹1,20,00,000 was received by account payee cheque and online transfer before the due date; the rest was cash. Ramesh is an eligible assessee. Compute presumptive income under section 58.

Show the solution

Total turnover ₹1,80,00,000 is within ₹2,00,00,000, so the cash condition need not be tested.
Digital turnover ₹1,20,00,000 × 6% = ₹7,20,000.
Other turnover ₹1,80,00,000 − ₹1,20,00,000 = ₹60,00,000 × 8% = ₹4,80,000.
Presumptive profit = ₹7,20,000 + ₹4,80,000 = ₹12,00,000.
No actual profit is claimed lower, so no deduction is allowed.

Answer: Business income under section 58 is ₹12,00,000.

Example 2

Dr. Meena Iyer, a resident individual and specified professional, has gross receipts of ₹70,00,000 in tax year 2026-27. Cash receipts are ₹2,80,000. Actual profit is ₹30,00,000. Compute income under section 58 and say whether the scheme applies.

Show the solution

Receipts ₹70,00,000 exceed ₹50,00,000, so the higher limit of ₹75,00,000 must be used.
Cash ratio = ₹2,80,000 ÷ ₹70,00,000 = 4%, which is not more than 5%. The condition is met, so serial 3 applies.
Presumptive profit = 50% × ₹70,00,000 = ₹35,00,000.
The Table taxes the higher of ₹35,00,000 and the profit claimed to have been actually earned.
Her actual profit is ₹30,00,000, which is lower than ₹35,00,000. She may declare ₹30,00,000 only if she keeps books under section 62 and gets an audit under section 63, because her total income exceeds the maximum amount not chargeable to tax (sub-section (3)).
If she does not keep books and get an audit, she declares ₹35,00,000.

Answer: The scheme applies. Income is the higher of ₹35,00,000 and the actual profit claimed. She can declare the lower ₹30,00,000 only if she maintains books and gets an audit under sub-section (3); otherwise she declares ₹35,00,000.

Exam tips

Always state the category and the limit test first. Examiners give marks for this step.
Show the 6% and 8% split on separate lines so partial marks are safe.
Write that no expense, deduction or loss is allowed, citing sub-section (4).
For MCQs, check the cash ratio and the assessee type before computing.
Use only 2025 Act terms: tax year and section 58, not older numbering.

Practice questions from Profits and Gains of Business or Profession

Special Business Provisions and Presumptive Taxation in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Special Business Provisions and Presumptive Taxation: frequently asked questions

Who can opt for presumptive taxation for a small business?

An eligible assessee under section 58: a resident individual, HUF or firm other than an LLP. The assessee must not claim Chapter VIII-C deduction, carry on a specified profession, earn commission or brokerage, or run agency business.

What is the turnover limit for presumptive taxation?

For general business it is ₹2 crore, or ₹3 crore if cash receipts are within 5% of turnover. For specified professions it is ₹50 lakh, or ₹75 lakh if cash receipts are within 5% of gross receipts.

What is the difference between the business and profession schemes?

The business scheme uses 6% for digital receipts and 8% for other turnover. The profession scheme uses a flat 50% of gross receipts. Their limits and eligible assessees also differ.

Can I claim lower profit than the presumptive profit?

Yes, but if your total income exceeds the maximum amount not chargeable to tax, you must keep books under section 62 and get an audit under section 63. Under serial 1, declaring lower profit within five years can also bar the scheme for five tax years.