Presumptive taxation

Presumptive taxation is a simpler way to work out income for small businesses and some professionals. Instead of keeping detailed accounts, you declare a fixed share of your receipts as income: 50% for listed professions, 6% or 8% for small businesses.

Why it exists

For a small business or a freelancer, maintaining full books of account and getting them audited is a burden out of proportion to the tax involved. The presumptive scheme, in section 58 of the Income-tax Act, 2025, lets eligible taxpayers skip detailed accounts and simply presume their income as a set percentage of turnover or receipts. Tax is then charged on that presumed income at the normal slab rates.

The limits and percentages

For listed professions (legal, medical, engineering, architecture, accountancy, information technology and a few others), gross receipts up to ₹50 lakh, or ₹75 lakh if cash receipts stay within 5%, qualify, and income is taken as 50% of receipts. For small businesses, turnover up to ₹2 crore, or ₹3 crore if cash receipts are within 5%, qualifies, and income is taken as 6% of digital receipts and 8% of the rest. In every case, you may declare a higher actual profit if there is one.

A couple of catches

Choosing the scheme also simplifies advance tax: you can pay the whole year’s in one instalment by 15 March. But if you opt in and later declare lower profit, you may be pulled into keeping accounts and an audit. It suits steady small operations more than complex ones. See managing an irregular income.