Presumptive Taxation for Small Businesses and Professionals: Section 58 of the Income-tax Act, 2025

Presumptive taxation lets a small taxpayer declare profit at a fixed percentage of turnover instead of keeping full books and computing actual profit. Under the Income-tax Act, 2025 this is section 58, and it has three schemes: 6% / 8% of turnover for small businesses (turnover up to Rs 2 crore, or Rs 3 crore with low cash receipts), 50% of gross receipts for specified professions (up to Rs 50 lakh, or Rs 75 lakh with low cash receipts), and a fixed amount per vehicle per month for goods carriage owners with up to ten vehicles.

This guide explains who can use each scheme, how the profit is computed, what happens if you declare a lower profit, and which return form applies. Every figure is from the Act as amended by the Finance Act, 2026 and the Income-tax Rules, 2026, with the section or rule number beside it. Last reviewed against that text on 10 November 2026. Section 61 of the same Act has presumptive rules for certain non-residents (shipping, aircraft and similar businesses); this article covers section 58, which is for residents.

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

Under section 58(2), the profit of a specified business or profession is deemed to be a fixed share of turnover or receipts, and that deemed amount is taxed under the head "Profits and gains of business or profession". Section 58(1) switches off the normal computation rules in sections 26 to 54 to the extent they conflict, so you do not claim expenses line by line.

Three consequences follow from section 58(4) to 58(6):

• No further loss, allowance or deduction is allowed against the presumptive income.
• Depreciation is treated as already claimed and allowed. The written down value of your assets is reduced as if you had claimed it every year.
• In the case of a firm in the goods carriage scheme, partners' salary and interest can still be deducted within the limits of section 35(e) (section 58(5)).

Which presumptive schemes does section 58 offer?

Sl. No. in section 58(2)	Who	Turnover / receipts limit	Deemed profit (or the actual profit if higher)
1. Business (other than goods carriage)	Eligible assessee	Up to Rs 2 crore; or up to Rs 3 crore if cash receipts do not exceed 5% of turnover	6% of turnover received by the specified banking or online mode (on or before the section 263(1) due date), plus 8% of the rest
2. Goods carriage	Owns not more than ten goods carriages at any time in the tax year	No turnover limit in the Table	Heavy goods vehicle: Rs 1,000 per tonne for each month or part of a month. Other vehicle: Rs 7,500 per month or part of a month
3. Specified profession (section 62(4))	Specified assessee	Up to Rs 50 lakh; or up to Rs 75 lakh if cash receipts do not exceed 5% of gross receipts	50% of gross receipts

In each row the rule is "whichever is higher": the deemed profit or the profit you claim to have actually earned (section 58(2), column E). So you can always declare more than the formula amount. Declaring less has consequences, covered below.

Who is an eligible assessee for the 6% / 8% business scheme?

Section 58(11)(a) says an eligible assessee is an individual, a HUF, or a firm other than an LLP, who is resident in India, and who:

• has not claimed any deduction under Chapter VIII-C for the tax year;
• does not carry on a specified profession (section 62(4));
• does not earn income in the nature of commission or brokerage; and
• does not carry on any agency business.

A company, an LLP, or a non-resident cannot use Sl. No. 1. The Finance Act, 2026 removed the old sub-clause that referred to section 144 deductions, with effect from 1 April 2026.

Who can use the 50% scheme for professionals?

Sl. No. 3 is open to a "specified assessee", meaning a resident individual or a firm other than an LLP (section 58(11)(b)), carrying on a specified profession. Section 62(4) lists these: legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology or company secretary, plus any other profession notified by the Board. A HUF is not a specified assessee here.

How is the 6% / 8% profit calculated? Two worked examples

The 6% rate applies to the part of turnover received through the specified banking or online mode during the tax year, or before the section 263(1) due date for that year. The 8% rate applies to the remaining turnover. Under section 58(9), a cheque or bank draft that is not account payee is treated as cash.

Step	Example 1: trader, Rs 1.5 crore turnover	Example 2: wholesaler, Rs 2.6 crore turnover
Tax year / assessee	2026-27, resident individual	2026-27, resident individual
Total turnover	Rs 1,50,00,000	Rs 2,60,00,000
Eligibility check	Within Rs 2 crore, so qualifies under column D(a)	Above Rs 2 crore. Cash received is Rs 10,00,000; 5% of Rs 2,60,00,000 = Rs 13,00,000. Cash is within 5%, so qualifies under column D(b)
Received by specified banking / online mode	Rs 1,20,00,000	Rs 2,50,00,000
6% of that amount	Rs 7,20,000	Rs 15,00,000
Balance turnover	Rs 30,00,000	Rs 10,00,000
8% of the balance	Rs 2,40,000	Rs 80,000
Deemed profit	Rs 9,60,000	Rs 15,80,000
Actual profit if he kept books	Rs 8,00,000, which is lower, so the deemed Rs 9,60,000 applies unless he follows the lower-profit route	Rs 17,00,000, which is higher, so Rs 17,00,000 is the figure under "whichever is higher"

The assumptions are illustrative. In Example 2 the cash limit is what keeps the wholesaler inside the scheme: had cash receipts been Rs 14,00,000 (more than 5%), turnover above Rs 2 crore would have taken him out of Sl. No. 1.

How are goods carriage owners taxed under section 58?

Sl. No. 2 applies to a person plying, hiring or leasing goods carriages, owning not more than ten at any time in the tax year. Section 58(11)(f) deems you the owner of a goods carriage you hold on hire purchase or instalments while any amount is still due. A "heavy goods vehicle" is one with a gross vehicle weight over 12,000 kg (section 58(11)(e)).

Vehicle	Months owned	Workings	Deemed income
1 heavy goods vehicle, gross vehicle weight 16 tonnes	12	Rs 1,000 x 16 tonnes x 12	Rs 1,92,000
3 other goods carriages	12 each	Rs 7,500 x 12 x 3	Rs 2,70,000
Total deemed income (tax year 2026-27)			Rs 4,62,000

A vehicle bought mid-year counts for every month or part of a month in which you owned it, so a vehicle owned from 20 June is charged from June. The higher of this figure and the profit you claim applies.

How is the 50% profession profit calculated?

Take a resident individual practising a specified profession in 2026-27, with gross receipts of Rs 40,00,000, of which Rs 1,50,000 came in cash. The limit under column D(a) is Rs 50 lakh, so the cash test is not needed. Deemed profit is 50% of Rs 40,00,000 = Rs 20,00,000. Had gross receipts been Rs 60,00,000, the person would qualify only under column D(b), and cash receipts would have to stay within 5% of Rs 60,00,000, which is Rs 3,00,000.

Which scheme applies to me? A quick decision path

What if my actual profit is lower than the presumptive profit?

You may declare less, but the compliance load comes back. Under section 58(3), if you claim that your actual profit is lower than the amount computed under section 58(2) and your total income exceeds the maximum amount not chargeable to tax, you must:

• keep and maintain books of account under section 62; and
• get the accounts audited and furnish the audit report under section 63.

Sections 62(2)(c) (books) and 63(1), Table Sl. No. 2 (audit) are triggered by the claim of a lower profit itself; section 58(3) adds the condition that total income exceeds the maximum amount not chargeable to tax. Section 63(2) works the other way: if you declare profit as per section 58(2), the tax audit provision of section 63 does not apply to you. The audit report goes in Form No. 26 (rule 47), and the "specified date" is one month before the return due date under section 263(1) (section 63(5)(a)).

If you declare	Books of account	Tax audit (Form No. 26)
Profit as per section 58(2) (the deemed amount or higher)	Not triggered by the scheme	Section 63 does not apply (section 63(2))
A lower profit, with total income above the maximum amount not chargeable to tax	Required (sections 58(3), 62(2)(c))	Required (sections 58(3), 63(1))

Goods carriage owners are different. Section 58(10) says sections 62 and 63 do not apply to the business in Sl. No. 2, and its income and receipts are left out when working out the monetary limits under those sections.

What is the five-year lock-out in section 58(7)?

If an eligible assessee declares presumptive profit under Sl. No. 1 for a tax year, and then declares profit that does not follow section 58 for any of the five tax years that follow, he loses the benefit of section 58 for the five tax years after the year of the default. If his total income also exceeds the maximum amount not chargeable to tax in those years, he must keep books and get a tax audit (section 58(8)).

Who must keep books anyway under section 62?

Presumptive taxation reduces the paperwork, but it does not remove all of it. Section 62(1)(a) requires anyone carrying on a specified profession to keep books, and rule 46(3) exempts the rule 46(2) professions from that list if gross receipts did not exceed Rs 1,50,000 in any of the three preceding tax years. Section 62(1)(b) covers other businesses and professions when:

• income exceeds Rs 1,20,000, or turnover exceeds Rs 10 lakh, in any of the three preceding years (for an individual or HUF, the figures change to income above Rs 2,50,000 and turnover above Rs 25 lakh, per section 62(2)(d)); or
• the assessee in section 58(2) claims income lower than the deemed profit.

Rule 46(2) names the professions that must keep the records in rule 46(4): legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, authorised representative and film artist (information technology and company secretary are in section 62(4) but not in this rule 46(2) list). Rule 46(4) lists a cash book, a journal (if the mercantile system is followed), a ledger, copies of bills or receipts for sums of Rs 250 or more, original bills of expenditure of Rs 250 or more, and payment vouchers for spends up to Rs 250 where the cash book lacks adequate particulars. Books are kept for seven tax years from the end of the relevant tax year (rule 46(9)).

Real-life examples

Ravi, a kirana retailer. Ravi runs a grocery shop in Indore with Rs 1.4 crore turnover in 2026-27, mostly UPI and card. He is a resident individual, earns no commission and claims no Chapter VIII-C deduction, so he is an eligible assessee. He declares 6% of the digital receipts and 8% of the cash receipts as his profit, pays tax on that, and does not need a tax audit because he declared as per section 58(2) (section 63(2)).

Meena, a freelance IT consultant. Meena bills Rs 42 lakh in 2026-27, almost all by bank transfer. Information technology is a specified profession, so she cannot use the 6% / 8% scheme, but she can use Sl. No. 3 and declare 50% of Rs 42 lakh, which is Rs 21 lakh. If her real expenses are only 30% of receipts, her actual profit (70%) is higher than the deemed amount, so she declares the higher figure, because column E says "whichever is higher".

Suresh, a small transporter. Suresh owns three light goods vehicles for the whole of 2026-27. His deemed income is Rs 7,500 x 12 x 3 = Rs 2,70,000, with no books or audit requirement for this business under section 58(10).

Anil, who wants to show a lower profit. Anil's trading business has Rs 90 lakh turnover and his own accounts show a profit of 4%. He declares that lower profit and his total income is above the basic exemption limit, so under section 58(3) he must keep books and get a Form 26 audit report. He should also check the five-year lock-out risk in section 58(7) before going this route year after year.

Which ITR form does a presumptive taxpayer file?

Under rule 164(5), an individual or HUF who is resident (other than not ordinarily resident), or a resident non-LLP firm, whose business income is computed under section 58 files Form SUGAM (ITR-4), with capital gains allowed only if they are long-term gains under section 198 not exceeding Rs 1,25,000. Rule 164(6) says you cannot use ITR-4 if, among other things, you:

• have assets, a signing authority or income outside India;
• are a director in a company, or held unlisted equity shares during the tax year;
• have total income above Rs 50 lakh;
• own more than two house properties;
• have any brought forward loss or loss to be carried forward; or
• have agricultural income above Rs 5,000.

Anyone else with business income files ITR-3 (rule 164(7)) or, for firms and similar persons, ITR-5 (rule 164(8)).

When is advance tax due for a presumptive taxpayer?

A taxpayer who declares profit under section 58(2), Sl. No. 1 (business) or Sl. No. 3 (profession) does not follow the four-instalment schedule. Section 408(2) requires the whole advance tax in one payment on or before 15 March of the financial year. Tax paid up to 31 March still counts as advance tax for that year (section 408(3)). If the advance tax paid by 15 March is less than the tax due on the returned income, section 425(3) charges simple interest at 1% on the shortfall. The goods carriage scheme (Sl. No. 2) is not named in these two provisions.

What is the due date for the return?

Under section 263(1)(c), Table Sl. No. 3, a person with business or professional income whose accounts are not required to be audited files by 31 August following the tax year. If the accounts are required to be audited (for example, after declaring a lower profit under section 58(3)), the date is 31 October (Sl. No. 2). These dates apply where section 172 does not apply; check the Table before relying on them for a transfer-pricing case.

Is presumptive taxation compulsory, and when does it not suit me?

Section 58 computes the deemed figure, but you can claim a lower profit, which is why it works as an option. It tends to be a poor fit when your actual profit is well below the fixed percentage, because declaring less brings books and an audit back, and the lock-out in section 58(7) can follow. It also gives no room to carry forward a loss, since section 58(4) disallows any loss against the deemed income and rule 164(6) bars ITR-4 where a loss is brought forward.

Common mistakes with presumptive taxation

1. Using Sl. No. 1 as a professional. A CA, doctor, lawyer or software consultant is a specified profession and is excluded from the eligible assessee definition. The route for them is Sl. No. 3.
2. Treating non-account-payee cheques as banking mode. Section 58(9) deems a receipt by a cheque or draft that is not account payee to be cash, which can break the 5% cash test and the 6% rate.
3. Forgetting the receipt cut-off. Money counts at 6% only if received by the specified mode during the tax year or before the section 263(1) due date for that year.
4. Declaring lower profit without planning for audit. Once total income is above the exemption limit, section 58(3) brings in books and a tax audit, and section 58(7) can lock you out for five years.
5. Claiming deductions on top of presumptive income. Section 58(4) blocks any further loss, allowance or deduction against the presumptive profit.
6. Filing the wrong ITR. Having a brought forward loss or a foreign asset takes you out of ITR-4 under rule 164(6).

Quick reference: limits and compliance

Item	Rule	Source
Business limit	Rs 2 crore; Rs 3 crore if cash is 5% or less	Section 58(2), Sl. No. 1, col. D
Business rates	6% digital, 8% balance	Section 58(2), Sl. No. 1, col. E
Profession limit	Rs 50 lakh; Rs 75 lakh if cash is 5% or less	Section 58(2), Sl. No. 3, col. D
Profession rate	50% of gross receipts	Section 58(2), Sl. No. 3, col. E
Goods carriage	Up to 10 vehicles; Rs 1,000 per tonne or Rs 7,500 per month	Section 58(2), Sl. No. 2
Lower profit claimed	Books and tax audit if total income exceeds basic exemption	Section 58(3), 62(2)(c), 63(1)
Audit report	Form No. 26, due one month before the return date	Rule 47; section 63(5)(a)
Lock-out	Five tax years	Section 58(7)
Return form	ITR-4 (SUGAM), subject to exclusions	Rule 164(5), (6)

Where this is in the Act

• Section 58: presumptive computation for certain residents (Table in sub-section (2), conditions in (3) to (11)).
• Section 62: maintenance of books of account; rule 46 prescribes the books and retention.
• Section 63: tax audit; rule 47 prescribes Form No. 26.
• Sections 408(2), 425(3): advance tax in one instalment and interest; section 263(1)(c): return due dates.
• Section 61: presumptive rules for certain non-residents (not covered in this article).
• Rule 164: ITR form eligibility, including ITR-4 (SUGAM).

For a CA firm, the hard part is tracking which clients are inside the limits, which have crossed the cash test, and which have declared a lower profit and now need books and a Form 26 report. Finexo's practice management software helps you keep those client-wise deadlines and tasks in one place. It does not compute the presumptive profit or file returns for you. For related reading, see TDS on rent under the Income-tax Act, 2025.

This article is general information drawn from the Act and Rules, not tax advice. Check your facts against the text or with a qualified professional before filing.