Presumptive Taxation for Small Businesses and Professionals

Presumptive taxation lets small businesses and professionals declare income at a fixed percentage of turnover or receipts, without maintaining detailed books of account or getting a tax audit. It is one of the simplest ways for small taxpayers to stay compliant. (These schemes were earlier known by the sections 44AD, 44ADA and 44AE.)

Note: the Income-tax Act, 2025 has replaced the Income-tax Act, 1961 from 1 April 2026. Section numbers have changed, but the concepts explained here continue. Always check the provisions that apply to your financial year.

Scheme for small businesses

• Available to resident individuals, HUFs and partnership firms (not LLPs).
• Turnover must be within the prescribed limit, which is higher when cash receipts are very small.
• Profit is deemed to be a fixed percentage of turnover – a lower rate applies to receipts through digital or banking channels than to cash receipts.
• You can declare a higher profit if actual profit is higher.

Scheme for professionals

• For specified professions such as doctors, lawyers, engineers, architects, accountants, technical consultants and interior decorators.
• Gross receipts must be within the prescribed limit.
• Profit is deemed at 50% of gross receipts.

Scheme for goods carriage owners

Transporters owning a limited number of goods vehicles can declare income at a fixed amount per vehicle per month.

Benefits

• No need to maintain detailed books of account for the scheme income.
• No tax audit, as long as you stay within the scheme.
• Advance tax can be paid in one instalment by 15 March.

Things to watch

• If you opt out of the business scheme after using it, you may not be able to use it again for a few years.
• Declaring income below the presumptive rate can require books of account and a tax audit.
• GST compliance is separate and still applies if you are registered.

Not sure if presumptive taxation suits you? Our ITR filing experts will compare the options.

Why Choose Vaidam Consultancy?

Our team of chartered accountants, company secretaries and legal professionals handles the paperwork so you can focus on growing your business.

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Call or WhatsApp us at +91 78369 69141 or email vaidamconsultancyllp@gmail.com.

Frequently Asked Questions

Q1. Can an LLP use the presumptive scheme for businesses?

No. It is available to resident individuals, HUFs and partnership firms, not LLPs.

Q2. Do I need to maintain books under presumptive taxation?

Detailed books are not required for scheme income, but keep basic records and bank statements.

Q3. Can freelancers in IT use the professional scheme?

Many technical consultants are covered; check whether your work falls within the specified professions.

Q4. Which ITR form is used for presumptive income?

Usually ITR-4 (Sugam) for eligible individuals, HUFs and firms.