The presumptive taxation scheme — offering businesses the option to declare a fixed percentage of turnover as profit without maintaining detailed books — has been a game-changer for small and digital businesses. Under the Income-tax Act 2025, the old Sections 44AD, 44ADA, and 44AE are renumbered as Section 58. The key benefit of 6% presumptive rate (instead of 8%) for digital receipts continues. This guide explains exactly who qualifies, the practical benefits, and when opting out makes more sense.
Use the Income Tax CalculatorModel the tax impact alongside this guide.
Limit Enhanced from Budget 2023: The turnover limit for business presumptive (Section 58) was raised to ₹3 crore (from ₹2 crore) provided 95% or more of receipts and payments are through banking/digital channels. This makes the scheme attractive for most digital-first businesses with revenue up to ₹3 crore.
The 6% Rate for Digital Businesses — How It Works
Under Section 58 of the new Act (old Section 44AD), if a business received 95% or more of its turnover through banking channels (NEFT, RTGS, UPI, card payments, net banking), the prescribed presumptive rate is 6% instead of 8%.
For a ₹2 crore digital business: Presumptive profit = ₹2 crore × 6% = ₹12 lakh. No need to maintain books, no audit required (below ₹10 crore digital threshold). Tax on ₹12 lakh (new regime rates) = approximately ₹60,000 — effectively a 3% effective tax rate on turnover.
Case Study: Riya's SaaS Startup — Presumptive vs Actual Profit
SaaS Founder, Bengaluru — Tax Year 2026-27
Riya runs a B2B SaaS business with ₹1.8 crore turnover, all digital receipts. Her actual expenses: cloud infrastructure ₹40L, salaries ₹60L, marketing ₹20L, office ₹8L. Actual net profit = ₹1.8 crore − ₹1.28 crore = ₹52 lakh.
Presumptive (6%)
Taxable profit: ₹10.8 lakh
Actual profit
Taxable profit: ₹52 lakh
On presumptive: Tax = ~₹60,000 (new regime) + no audit, no detailed books. On actual: Tax = ~₹12,50,000. Riya opts for Section 58 presumptive — saves ₹11.9 lakh in tax, zero audit cost, zero detailed bookkeeping.
Caveat: Once opted, Riya must continue presumptive for 5 consecutive years. If she opts out in Year 3, she cannot re-enter for 5 years and must get a tax audit in the year of opt-out.
When NOT to Choose Presumptive Taxation
Heavy losses: Presumptive scheme doesn't allow business loss — you must declare at least 6%/8% as profit even if actual business has a loss
Large deductible expenses: If actual net profit is below 6% of turnover (e.g., high infrastructure, R&D cost), opt out and declare actual profit
Carry-forward losses: You cannot carry forward business losses under presumptive scheme
WDV depreciation: No depreciation is separately deductible in presumptive scheme — WDV of assets is not tracked and carries forward at zero WDV when you exit
Professional Presumptive — Section 58 (Old 44ADA)
Professionals — doctors, lawyers, CAs, engineers, architects, consultants, etc. — with gross receipts ≤ ₹75 lakh can opt for Section 58 presumptive. Declared profit = 50% of gross receipts. The balance 50% is assumed to cover expenses. No detailed books, no audit required if receipts are ≤ ₹75 lakh and declared profit is ≥ 50%. A doctor with ₹50 lakh consulting fees declares ₹25 lakh as profit — paying approximately ₹3–5 lakh in tax (new regime) vs potentially declaring and justifying higher actual expenses.
Under Section 58 of the Income-tax Act 2025 (old Section 44AD), the business turnover limit for presumptive taxation is ₹3 crore — provided 95% or more of receipts and payments are through banking/digital channels. If digital condition is not met, the limit remains ₹2 crore. For professionals (Section 58, old 44ADA), the limit is ₹75 lakh in gross receipts.
If you opt for presumptive taxation under Section 58 and then opt out before completing 5 consecutive years, you are ineligible to opt for presumptive taxation for 5 years from the year of opt-out. Additionally, in the year you opt out, you must maintain full books of account and may need a tax audit. The WDV of assets is also affected — assets become ₹0 WDV in the year of exit, so you lose future depreciation benefits.