Presumptive Taxation for Small Businesses and Professionals: Who Can Opt and Limits
Presumptive taxation lets eligible taxpayers declare income at a fixed percentage. Here are the limits, rates and catches.
This guide on presumptive taxation explains the key points in plain language. Use the contents list below to jump to the section you need, and confirm the details on the official source listed at the end before you act.
Table of Contents
Presumptive taxation lets eligible small taxpayers declare income at a fixed percentage of turnover instead of maintaining detailed books and proving every expense. It saves effort, but it has limits and one important lock-in rule.
The three schemes
| Scheme (old Act section) | Who it covers | Turnover or receipts limit | Deemed profit |
|---|---|---|---|
| Small business (44AD) | Resident individuals, HUFs and partnership firms (not LLPs) | ₹2 crore, or ₹3 crore if cash receipts are 5% or less of turnover | 8% of turnover, or 6% of the part received digitally or through banking channels |
| Specified professionals (44ADA) | Resident professionals such as legal, medical, engineering, architecture, accountancy, technical consultancy and interior decoration | ₹50 lakh, or ₹75 lakh if cash receipts are 5% or less | 50% of gross receipts |
| Goods carriage (44AE) | Owners of up to 10 goods vehicles | Limit is the number of vehicles | Fixed amount per vehicle per month, based on vehicle type |
New Act: the Income-tax Act, 2025 applies from 1 April 2026. Summaries of the new Act indicate that Section 58 brings the business, professional and goods carriage schemes together in one provision, with the limits and deemed profit rates above carried over. The same summaries report new restrictions, including limits on claiming deductions and setting off losses, and a five-year lock-in. These are third-party summaries, so confirm the details in the text of Section 58 on the Income Tax Department portal before relying on them.
Who cannot opt for the business scheme
- LLPs.
- Persons already covered by the goods carriage scheme.
- Agency businesses and persons earning commission or brokerage.
The advance tax advantage
Presumptive taxpayers can generally pay their entire advance tax in a single instalment by 15 March, instead of four. See our guide to advance tax.
The five-year catch
Under the earlier Act, a taxpayer who opted for the business scheme was expected to stay in it for five consecutive years, and if they opted out they were barred from it for the next five years. In that case, if income exceeded the basic exemption limit they had to maintain books and get them audited. The professional scheme could be chosen year by year. Reports suggest the 2025 Act extends a lock-in to all three schemes, so check Section 58 before opting in.
Declaring lower income than the presumptive rate
If you declare less than the deemed profit and your total income exceeds the basic exemption limit, you must maintain books of account and get an audit done. Think carefully before doing this.
Pros and cons
- Pros: less record-keeping, simple filing, single advance tax payment.
- Cons: you cannot claim extra expenses beyond the deemed profit, and low-margin businesses may pay tax on profit they did not make. Banks also look at declared profit when assessing loans, as explained in our guide to project reports and DSCR.
Even under this scheme, simple records help. See our guide to bookkeeping for small businesses.
Frequently asked questions
What is the turnover limit for presumptive taxation of a small business?
₹2 crore, or ₹3 crore where cash receipts do not exceed 5% of turnover.
What profit percentage is declared?
8% of turnover for the business scheme, or 6% for digitally received amounts. Professionals declare 50% of gross receipts.
Can an LLP use the business scheme?
No. LLPs are not eligible.
Do I need to pay advance tax in instalments?
Generally no. Presumptive taxpayers can pay the full amount by 15 March.
This article is for general information only and is not tax, legal or financial advice. Rules, rates and criteria change and vary by lender, so confirm the latest position with the official source or your lender before acting.
Official source for presumptive taxation
Always verify current rules, dates and forms on the official website: Income Tax Department. For help applying this to your own case, see our professional services.
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