Concepts · Glossary
Presumptive Taxation
Tax scheme where profits are presumed at a fixed percentage of receipts, no books required.
Updated 2026-10-08Source: Income-tax Act · CGST Act · CBDT/CBIC
What it means
Presumptive taxation (Sections 44AD, 44ADA, 44AE of the Income Tax Act, 1961) lets small taxpayers declare a presumed percentage of gross receipts as taxable profit — 50% under 44ADA (specified professions), 8% under 44AD (business, 6% if non-cash), per-tonne basis under 44AE (goods transport).
Benefits: no books of accounts (Section 44AA(1) relief), no statutory audit, simpler ITR-4 filing. Constraints: gross receipts ceilings (Rs. 50/75L for 44ADA, Rs. 2/3 crore for 44AD), advance tax due in one lump sum on 15 March instead of quarterly, and — for 44AD only — a five-year bar after exit (Section 44AD(4)).
A worked example
Rs. 30L gross under 44ADA → Rs. 15L deemed profit → new-regime tax Rs. 1,05,000 + 4% cess = Rs. 1,09,200 (no 87A: income is above Rs. 12L and the tax exceeds the excess). Same Rs. 30L under actual books with Rs. 5L expenses → Rs. 25L profit → Rs. 3,30,000 + cess = Rs. 3,43,200. 44ADA saves Rs. 2,34,000 here, because the real expenses are well under 50%.
You choose presumptive or actual each year when you file, but plan from the start. Declaring actual profit below 50% needs books kept through the year (and an audit above the basic exemption), and non-presumptive income is due in four advance-tax instalments, not one. Under 44ADA (s.58 from tax year 2026-27) there is no lock-in; under 44AD, leaving it triggers the five-year bar in Section 44AD(4). Model both with your CA early in the year.
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Income-tax entries cite the Income-tax Act 1961, which governs FY 2025–26 (the return filed in 2026); from tax year 2026–27 the Income-tax Act 2025 applies, with new section numbers shown where we give them. GST law is unchanged. General information, not tax advice; verify with your CA before you file.
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