Presumptive Taxation in Tax Year 2026-27: Section 58 of the Income-tax Act 2025 (Formerly 44AD, 44ADA and 44AE)

For tax year 2026-27, presumptive taxation sits in section 58 of the Income-tax Act 2025: a small business with turnover up to ₹2 crore (₹3 crore if cash receipts are within 5%) declares 6% of digital receipts and 8% of the rest as income, and a professional with receipts up to ₹50 lakh (₹75 lakh if cash is within 5%) declares 50%. In return there are no books of account or tax audit to keep for that income, and advance tax is paid in one instalment by 15 March. Section 58 replaced sections 44AD, 44ADA and 44AE of the 1961 Act on 1 April 2026 without changing the limits or rates.

Sources checked: 20 October 2026

Facts checked on 20 October 2026 against the Income-tax Act 2025 (sections 58, 408 and 425 on incometaxindia.gov.in).

Key facts

	Business (Table serial 1, formerly 44AD)	Profession (serial 3, formerly 44ADA)	Goods carriages (serial 2, formerly 44AE)
Who	Resident individual, HUF, partnership firm (not LLP)	Resident individual or firm (not LLP) in a specified profession	Anyone owning up to 10 goods carriages at any time in the year
Limit	Turnover ₹2 crore; ₹3 crore if cash receipts ≤ 5%	Receipts ₹50 lakh; ₹75 lakh if cash receipts ≤ 5%	Not turnover-based
Deemed income	6% of turnover received by banking or online mode; 8% of the rest (or actual profit, if higher)	50% of gross receipts (or actual profit, if higher)	₹1,000 per ton a month for each heavy goods vehicle; ₹7,500 a month for each other vehicle
Books and audit	Not required at the deemed rate	Not required at the deemed rate	Not required
Advance tax	One instalment by 15 March	One instalment by 15 March	Four instalments

A cheque or draft that is not account-payee counts as cash (section 58(9)). Receipts by banking or online mode count for the 6% rate if received during the year or before the return due date.

Who can use section 58?

Resident individuals, HUFs and partnership firms (not LLPs) can use the business scheme, unless they earn commission or brokerage, run an agency business, carry on a specified profession or claim a deduction under Chapter VIII-C for the year (section 58(11)(a)). The profession scheme is for resident individuals and firms (not LLPs) in the specified professions of section 62(4), such as legal, medical, engineering, architecture, accountancy and technical consultancy. Companies and LLPs cannot use either.

How does presumptive income work in practice?

• Income is deemed at the scheme's rate. You may declare a higher profit, but no further loss, allowance or deduction is allowed against the presumptive income (section 58(4)); depreciation is treated as already claimed (section 58(6)).
• Partners' salary and interest are deducted from a firm's presumptive income only under the goods-carriage scheme (section 58(5)), not under the business or profession schemes.
• Advance tax for business and professional income under section 58 is paid in one instalment by 15 March (section 408(2)); a shortfall then carries 1% interest (section 425(3)).
• Return form: for FY 2025-26 the presumptive return was ITR-4 (Sugam) for resident individuals, HUFs and firms other than LLPs with total income up to ₹50 lakh, and ITR-3 or ITR-5 otherwise. The form for tax year 2026-27 will be notified under the 2025 Act; check it before you file.

What is the five-year lock-in?

If a business declares income under section 58 (serial 1) in one year and, in any of the next five years, declares a lower profit than the scheme requires, it cannot use the scheme for the five years after that (section 58(7)). In those years, if total income exceeds the basic exemption limit, it must keep books and have them audited (section 58(8)).

The lock-in applies to the business scheme only. A professional who declares less than 50% has no lock-in, but, like anyone under section 58 who claims a lower profit, must keep books and get an audit for that year when total income exceeds the basic exemption limit (section 58(3)).

When is presumptive not the cheaper option?

When your real margin is well below the deemed rate. A thin-margin trader earning 3–4% on turnover, or a professional whose costs eat more than half the fees, may pay more tax at the deemed rate than on actual profit. Run both numbers before choosing, and remember the lock-in before switching out.

Worked examples

• A consultant with ₹40 lakh of receipts, all by bank transfer, declares ₹20 lakh (50%). If actual expenses are ₹8 lakh, real profit is ₹32 lakh, so the scheme saves tax on ₹12 lakh and the cost of an audit. If actual expenses are ₹25 lakh, real profit is ₹15 lakh and the scheme costs tax on ₹5 lakh.
• A trader with ₹1.8 crore of turnover, 70% received digitally, declares 6% of ₹1.26 crore plus 8% of ₹54 lakh: ₹7.56 lakh + ₹4.32 lakh = ₹11.88 lakh. If the real margin is 4% (₹7.2 lakh), the scheme costs tax on ₹4.68 lakh; declaring the lower figure instead would need books, an audit if income is above the exemption limit, and would shut the scheme for five years.

What changed on 1 April 2026?

Only the law and the references. The Income-tax Act 2025 applies from tax year 2026-27 and lays the three schemes out in one table in section 58; the ₹2 crore / ₹3 crore and ₹50 lakh / ₹75 lakh limits, the 6% / 8% / 50% rates and the goods-carriage rates continue. "Tax year" replaces "previous year" and "assessment year". The return for FY 2025-26 is filed under the 1961 Act with the old section numbers.

Not sure whether section 58 or regular books will cost you less? Our income tax services compare both on your actual figures, or ask our expert team. For a choice of structure, see proprietorship vs LLP vs private limited; the compliance calendar lists the 15 March date.