Presumptive Taxation 6% & 8% Rule

Not everyone can use this scheme — but it covers a wide range of small business owners.

Under Section 58 of the Income Tax Act 2025 (which replaces the old Section 44AD), you are eligible if:

• You are a resident Individual, HUF (Hindu Undivided Family), or a Partnership Firm — but NOT an LLP
• Your business is not commission/brokerage-based, not an agency, and not a specified profession (like a doctor, CA, or lawyer)
• Your annual turnover is ₹2 Crore or less — or up to ₹3 Crore if 95% or more of your receipts come through digital/banking channels

So if you run a shop, a manufacturing unit, a restaurant, a trading business, or offer non-professional services — and your turnover fits the limit — you most likely qualify.

The limit depends on how you receive payments:

• ₹2 Crore — the standard limit for all eligible businesses
• ₹3 Crore — available if your cash receipts are 5% or less of total turnover (i.e., you collect 95%+ payments digitally through UPI, NEFT, RTGS, or account payee cheques)

One thing worth knowing: the old Section 44AD and the new Section 58 have the same turnover limits. The Income Tax Act 2025 didn’t change this — it just consolidated the rules under one cleaner section, applicable from 1st April 2026.

So if your turnover is ₹2.5 Crore and most of it comes digitally, you still qualify. But if cash payments cross that 5% mark, the ₹2 Crore cap applies — and you’d be out of the scheme.

Think of it this way — normally, to calculate income tax, a business has to track every single expense: rent, salaries, electricity bills, raw material costs, and more. That’s a lot of paperwork, and mistakes happen.

Presumptive taxation skips all of that.

Instead, the government says: “We’ll assume a fixed percentage of your turnover is your profit. Declare that, pay tax on it, and you’re done.”

Under Section 58 (Income Tax Act 2025), that fixed rate is:

• 6% of turnover received through digital/banking modes
• 8% of turnover received in cash

You don’t need to prove your expenses separately. You don’t need to maintain a full profit & loss account. You don’t need to get a tax audit (in most cases). It’s genuinely that simple — which is why it’s one of the most useful provisions for small businesses in India.

It’s completely optional. You choose whether to declare income under this scheme or not.

But here’s the catch — once you opt in for a year, you should plan to stay in for at least 5 consecutive years. If you opt out in any of those years (by declaring profit lower than the presumptive rate), you lose the right to use this scheme for the next 5 years. During that period, regular bookkeeping and possibly a tax audit become mandatory.

So while it’s not compulsory, it’s not something to jump in and out of casually either.

The difference comes down to how your customers pay you.

• If payment comes via UPI, Google Pay, Paytm, NEFT, RTGS, or cheque (account payee) → you declare 6% of that amount as profit
• If payment is received in cash → you declare 8% of that amount as profit

The government offers the lower 6% rate as an incentive to encourage digital transactions. It’s their way of nudging businesses away from cash — and rewarding those who are already working digitally.

If your business has a mix of both cash and digital receipts, you apply 6% to the digital portion and 8% to the cash portion separately, then add both to arrive at your total presumptive income.

That depends on how much profit you actually declare.

If your declared profit falls under ₹12 Lakh (the current basic exemption plus rebate limit for individuals), you pay zero income tax — legally. For example, if your turnover is ₹2 Crore and all receipts are digital, your presumptive income is 6% = ₹12 Lakh, which means no tax liability.

But you still need to file your ITR (Income Tax Return). Zero tax doesn’t mean zero filing.

Also remember — this only covers income tax. GST (if applicable to your business) is a completely separate matter and must be handled independently.

Yes — if you have side business income in addition to your salary, you can declare that business income under Section 58, as long as the eligibility conditions are met.

Your salary income and business income are added together to calculate your total taxable income. The presumptive scheme applies only to the business portion, not to your salary.

You can declare a lower profit — but it comes with conditions.

If your actual profit is below the presumptive rate and your total income exceeds the basic exemption limit (₹4 Lakh currently), you must:

1. Maintain proper books of accounts
2. Get a tax audit done under Section 63

Skipping the audit in this situation can result in heavy penalties. If you’re in this position, consult a CA before filing — it’s not worth the risk of getting it wrong.

They are essentially the same provision — just under different laws.

• Section 44AD belonged to the Income Tax Act 1961 (the old law)
• Section 58 is the equivalent provision under the Income Tax Act 2025 (the new law), applicable from 1st April 2026

The rates (6%/8%), the turnover limits (₹2 Cr / ₹3 Cr), the eligibility criteria, and the 5-year rule — all remain the same. The main change is that the new Act also merges what used to be Sections 44ADA (professionals) and 44AE (transport operators) into this single Section 58, making the whole framework cleaner and easier to follow.