Presumptive Tax 44AD in New Act: Limits and Rules
- 44AD, 44ADA, 44AE merged into Section 58 under the Income Tax Act 2025. Substance preserved.
- Business (old 44AD): Deemed profit 8% (cash) / 6% (digital). Turnover limit Rs 3 crore if digital receipts above 95%.
- Professionals (old 44ADA): Deemed profit 50%. Turnover limit Rs 75 lakh.
- Lock-in caveat: Opt out of presumptive once and you cannot return for 5 years.
If you are a small business owner, freelancer, or professional who uses presumptive taxation to simplify your tax filing, your main question is: do Sections 44AD, 44ADA, and 44AE still work under the new Income Tax Act 2025? Yes - presumptive taxation continues. These three sections have been merged into Section 58 of the Income Tax Act 2025.
44AD / 44ADA / 44AE → Section 58: What Changed
One section number, same underlying rules. The consolidation makes the law easier to navigate without changing the substance.
Who Qualifies for Presumptive Taxation
Presumptive taxation is a simplified scheme where you declare a minimum percentage of your turnover as profit - no need to maintain detailed books of accounts. Under new Section 58, the following taxpayers qualify:
- Small businesses (resident individuals, HUFs, and partnership firms excluding LLPs) with total turnover up to Rs 2 crore
- Professionals (doctors, lawyers, CAs, architects, engineers, and other notified professionals) with gross receipts up to Rs 50 lakh
- Goods transport operators owning up to 10 goods carriages
Companies and LLPs cannot use the presumptive scheme.
Deemed Profit Rates
Under presumptive taxation, you declare a minimum percentage of turnover as your profit. You do not need to track every expense:
- 8% of turnover - for cash receipts (cheques, cash payments received from customers)
- 6% of turnover - for digital receipts (amounts received through bank transfer, UPI, or any digital mode)
- 50% of gross receipts - for professionals (doctors, CAs, lawyers, architects, etc.)
- Rs 7,500 per vehicle per month - for goods transport operators (or actual income, whichever is higher)
You can always declare a higher profit than these minimums. You just cannot go below them without maintaining full books of accounts.
The Digital Receipt Threshold
The 6% rate (instead of 8%) applies only to amounts received through digital or banking channels. This is an incentive to go cashless:
- UPI payments from customers - qualify for 6% rate
- Bank transfers / NEFT / RTGS - qualify for 6% rate
- Cheque or demand draft - qualify for 6% rate
- Cash received - 8% rate applies
If your business receives Rs 1 crore through UPI and Rs 50 lakh in cash, your deemed profit is: (Rs 1 crore x 6%) + (Rs 50 lakh x 8%) = Rs 6 lakh + Rs 4 lakh = Rs 10 lakh.
Important Rules to Know
- No books of accounts needed - if you declare at least the minimum deemed profit, you are exempt from maintaining detailed books
- No tax audit needed - businesses under the presumptive scheme do not need a tax audit under Section 60 (old Section 44AB)
- Advance tax - you must pay your entire advance tax in one installment by March 15. Quarterly installments are not required
- 5-year lock-in - if you opt for presumptive taxation and later opt out, you cannot use the scheme again for the next 5 years
- All deductions are deemed included - you cannot claim separate deductions for expenses like depreciation, salary, rent, etc. They are considered included in the deemed profit calculation
- Partner salary and interest - for partnership firms, remuneration and interest to partners are allowed as deductions from the deemed profit
If you opt INTO presumptive taxation and later opt OUT (declare lower-than-deemed profit one year), you cannot use the scheme again for 5 years. Run the math for the next 3 to 5 years before exiting. Service exporters who cross 44ADA limits often regret early exits.
Frequently Asked Questions
What is the new section for 44AD presumptive taxation?
Sections 44AD, 44ADA, and 44AE have all been merged into Section 58 under the Income Tax Act 2025. The turnover limits, deemed profit rates, and eligibility rules remain exactly the same.
What is the turnover limit for presumptive taxation?
For businesses, the limit is Rs 2 crore total turnover (Rs 3 crore if digital receipts are above 95%). For professionals (doctors, CAs, lawyers, architects), the limit is Rs 75 lakh gross receipts. LLPs and companies cannot use the presumptive scheme.
What is the difference between 6% and 8% profit rate?
The 6% deemed profit rate applies to receipts through digital or banking channels (UPI, bank transfer, cheque). The 8% rate applies to cash receipts. This encourages cashless transactions.
Do I need a tax audit under presumptive taxation?
No. If you declare at least the minimum deemed profit (6%/8% of turnover or 50% of gross receipts), you are exempt from both maintaining detailed books and getting a tax audit under Section 57 (old 44AB).
For service exporter freelancers using 44ADA, see 44ADA for freelancers. For the structure decision when you outgrow presumptive (Pvt Ltd, LLP, US LLC), see our service exporters page.
Disclaimer: This article provides general information about the Income Tax Act 2025 and is not tax advice. Consult a qualified Chartered Accountant for advice specific to your situation.
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