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Tax Laws and Practice · Profits and Gains from Business and Profession

Presumptive Taxation for Business and Profession under Income-tax Act, 2025

Updated 11 October 2026 · Fact-checked

Presumptive taxation lets you declare profit as a fixed percentage of turnover instead of keeping full accounts. Section 58 covers resident small businesses, goods carriage owners and specified professionals. Section 61 fixes deemed profit for certain non-residents. To solve a question, check eligibility, test the turnover limit, apply the rate, then compare with actual profit.

Understand Deemed Profits and Special Business Provisions

Normal business income is worked out from books of account: receipts less allowed expenses. For a small trader or professional, this is costly. Presumptive taxation solves this. The law presumes a profit as a fixed share of turnover or receipts, and you pay tax on that amount.

Section 58 of the Income-tax Act, 2025 gives this relief to residents. It has three cases. First, an eligible assessee (an individual, HUF or firm other than an LLP, resident in India) carrying on any business other than goods carriage. Second, an assessee owning not more than ten goods carriages. Third, a specified assessee (a resident individual or firm other than an LLP) carrying on a specified profession under section 62(4).

Once you opt in, the computed income is final. No loss, allowance or deduction is allowed against it (section 58(4)). The written down value of assets is still worked out as if depreciation had been claimed and allowed. For a firm in the goods carriage case, partners' salary and interest are deducted, subject to the section 35(e) limits.

You may claim that your actual profit is lower than the presumptive profit. Then, if your total income exceeds the maximum amount not chargeable to tax, you must keep books under section 62 and get a tax audit under section 63. Section 61 is a different idea. It deems profit for certain non-residents, such as shipping, aircraft and cruise operators, using a percentage of the amounts paid, payable, received or deemed received.

Key rules to remember

General business (section 58, Sl. 1): eligibility and limit
Turnover ≤ ₹2 crore; or ≤ ₹3 crore if cash receipts ≤ 5% of turnover
Assessee must be an eligible assessee. Not available for specified professions, commission or brokerage income, or agency business.
General business: presumptive profit
6% × turnover received by specified banking or online mode (by the section 263(1) due date) + 8% × remaining turnover; or actual profit if higher
The higher of the two figures is deemed to be profit. The 6% applies to receipts by specified banking or online mode during the tax year or before the due date.
Goods carriage (section 58, Sl. 2)
Heavy goods vehicle: ₹1,000 per ton × months (or part) owned; Other vehicle: ₹7,500 per vehicle × months (or part) owned
Assessee must own not more than ten goods carriages at any time in the year. Heavy means gross vehicle weight above 12,000 kg. For a heavy vehicle, the ton rate applies to gross vehicle weight or unladen weight, as the case may be. Actual profit applies if higher.
Specified profession (section 58, Sl. 3)
Gross receipts ≤ ₹50 lakh; or ≤ ₹75 lakh if cash receipts ≤ 5% of gross receipts. Profit = 50% of gross receipts or actual profit, whichever is higher
Specified assessee is a resident individual or firm other than an LLP.
Lock-in (section 58(7))
Profit declared under Sl. 1 for a year, then profit not declared as per section 58 in any of the next 5 tax years → not eligible for the scheme for 5 tax years after the year of that default
Applies to Sl. 1 businesses. Under section 58(8), if total income then exceeds the basic exemption limit, the assessee must keep books under section 62 and get an audit under section 63.
Non-resident presumptive rates (section 61)
Ships 7.5% of (A+B); cruise ships 20% of (A+B); aircraft 5% of (A+B); mineral oil services 10% of (A+B); electronics services or technology in India to a resident company 25% of (A+B); turnkey power project 10% of amount paid or payable
Cruise ships are subject to prescribed conditions. Turnkey power project: foreign company and project approved by the Central Government. Electronics (Sl. 6): the services or technology must be provided in India to a resident company that is establishing or operating an electronics manufacturing facility under a scheme notified by the Central Government in the Ministry of Electronics and Information Technology, and that meets the prescribed conditions. Sl. 4 and 5 assessees may claim lower actual profit with books and audit.

How to solve Deemed Profits and Special Business Provisions questions

Use this order for any presumptive taxation question. It keeps the law, the figures and the conclusion in the ICSI answer style.

  1. 1Identify the assessee: resident or non-resident, and individual, HUF, firm, LLP or company. This decides between section 58 and section 61.
  2. 2Identify the activity: general business, goods carriage, specified profession, or a section 61 business such as shipping.
  3. 3Check disqualifiers: LLP, commission or brokerage income, agency business, a specified profession (for the business case), or deduction claimed under Chapter VIII-C.
  4. 4Test the limit: turnover up to ₹2 crore (₹3 crore with cash up to 5%), or professional receipts up to ₹50 lakh (₹75 lakh with cash up to 5%). Treat non-account-payee cheques and drafts as cash (section 58(9)).
  5. 5Apply the rate: split turnover between banking or online receipts (6%) and others (8%); use 50% for professions; use the per-vehicle rates for goods carriage.
  6. 6Compare with actual profit if given. Take the higher for section 58. If actual profit is lower and the assessee claims it, state the books and audit requirement.
  7. 7Remember that no deduction or loss is allowed against presumptive income; adjust partners' salary and interest only for the goods carriage firm.
  8. 8Write the conclusion with the section number and the final taxable business income.

Quickest way: Four-line check for section 58 problems

When to use it: Use this when you have a numerical question with turnover, receipts mode and an actual profit figure, and little time.

  1. Line 1: Name the section and the row (Sl. 1, 2 or 3) with the assessee test.
  2. Line 2: Write the limit test with the cash percentage worked out.
  3. Line 3: Compute 6% of digital receipts plus 8% of the rest (or 50%, or the per-vehicle amount).
  4. Line 4: Compare with actual profit, pick the higher, and state that no further deduction is allowed.

Common mistakes in Deemed Profits and Special Business Provisions

  • Applying 8% to the entire turnover

    Students remember only one rate.

    Fix: Split turnover. Use 6% for amounts received by specified banking or online mode within the time allowed, and 8% for the balance.

  • Allowing the ₹3 crore limit without checking cash receipts

    The higher limit looks like a general rule.

    Fix: The ₹3 crore limit works only if cash receipts do not exceed 5% of turnover. For professions, ₹75 lakh needs cash up to 5% of gross receipts.

  • Deducting expenses or depreciation from presumptive profit

    Habit from normal business computation.

    Fix: Section 58(4) bars every deduction, loss and allowance. Depreciation is only deemed allowed for working out written down value.

  • Using 8% for a professional

    Confusing the business and profession rows.

    Fix: A specified profession uses 50% of gross receipts. A person carrying on a specified profession is not an eligible assessee for the business row.

  • Treating a non-account-payee cheque as digital receipt

    Any bank instrument seems non-cash.

    Fix: Section 58(9) deems a cheque or draft that is not account payee to be a cash receipt.

  • Applying section 61 to a resident or applying 7.5% to all non-resident businesses

    Mixing up the rates in the table.

    Fix: Section 61 covers only non-residents (a foreign company for turnkey power projects). Match each business to its own rate.

Worked examples

Example 1

Rohan, a resident individual, runs a trading business and is an eligible assessee. His turnover for the tax year is ₹1,50,00,000, of which ₹1,20,00,000 is received by specified banking or online mode within the time allowed. His actual profit is ₹9,00,000. Compute his business income under section 58.

Show the solution
  1. Turnover ₹1.5 crore does not exceed ₹2 crore, so the limit is met.
  2. 6% of ₹1,20,00,000 = ₹7,20,000.
  3. Remaining turnover = ₹1,50,00,000 − ₹1,20,00,000 = ₹30,00,000. 8% of ₹30,00,000 = ₹2,40,000.
  4. Presumptive profit = ₹7,20,000 + ₹2,40,000 = ₹9,60,000.
  5. Compare with actual profit ₹9,00,000. The higher figure is ₹9,60,000.

Answer: Business income under section 58 is ₹9,60,000. No deduction or loss is allowed against it.

Example 2

Dr. Meera, a resident individual and specified professional, has gross receipts of ₹60,00,000 in the tax year. Cash receipts are ₹2,40,000. Her actual profit is ₹26,00,000. Can she use section 58, and what is her income?

Show the solution
  1. Gross receipts exceed ₹50 lakh, so limit (a) fails.
  2. Test limit (b): the limit is ₹75 lakh, and cash must not exceed 5% of gross receipts.
  3. 5% of ₹60,00,000 = ₹3,00,000. Cash receipts of ₹2,40,000 are below this.
  4. Both conditions are met, so section 58 applies.
  5. Presumptive profit = 50% of ₹60,00,000 = ₹30,00,000.
  6. Actual profit ₹26,00,000 is lower, so the higher figure is ₹30,00,000.

Answer: Dr. Meera can use section 58 and her profit is ₹30,00,000. If she claims lower profit of ₹26,00,000 and her total income exceeds the maximum amount not chargeable to tax, she must keep books under section 62 and get an audit under section 63.

Exam tips

  • Write the section number and row first, then the eligibility conditions. ICSI answers earn marks for the provision before the working.
  • Always show the limit test with the 5% cash calculation, even if it passes.
  • Show the 6% and 8% split on separate lines so partial marks are safe.
  • Be ready to contrast section 58 (resident, optional, higher of actual profit) with section 61 (non-resident, deemed rates on payments).
  • Close with a one-line conclusion stating the income and that no deduction is allowed.

Practice questions from Profits and Gains from Business and Profession

Deemed Profits and Special Business Provisions in other exams

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

Deemed Profits and Special Business Provisions: frequently asked questions

What is presumptive taxation under the Income-tax Act, 2025?

It is a scheme under section 58 where profit is deemed to be a fixed percentage of turnover or receipts. Small residents avoid detailed accounts. The rates differ for general business, goods carriage and specified professions.

What is the difference between presumptive taxation for business and for profession?

For eligible business, profit is 6% or 8% of turnover, with a limit of ₹2 crore (₹3 crore with low cash). For a specified profession, profit is 50% of gross receipts, with a limit of ₹50 lakh (₹75 lakh with low cash). In both cases, actual profit applies if higher.

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 section 58(7), if an eligible assessee declares profit under Sl. 1 and then, in any of the next five tax years, declares profit not as per the presumptive rates, he cannot use the scheme for five tax years after the year of that default. Under section 58(8), if his total income then exceeds the basic exemption limit, he must also keep books and get an audit.

Does section 61 apply to residents?

No. Section 61 applies to non-residents, and to foreign companies in the turnkey power project case. It deems profit at a set percentage of amounts paid, payable, received or deemed received, such as 5% for aircraft operation.