Presumptive Taxation for Small Businesses: 44AD-Style Evidence Checklist

Presumptive taxation simplifies profit computation; it does not eliminate the need to prove turnover, business identity, bank flow and statutory eligibility.

What the taxpayer should understand

• The Income-tax Act, 2025 took effect on 1 April 2026. FY 2025–26 and AY 2026–27 remain governed by the Income-tax Act, 1961, including the notified AY 2026–27 ITR forms. Tax year 2026–27 beginning 1 April 2026 is governed by the 2025 Act and the Income-tax Rules, 2026. Legacy section numbers and forms should therefore be used only for the period to which they legally apply.
• For FY 2025–26, section 44AD permits eligible resident individuals, HUFs and partnership firms other than LLPs to consider presumptive business taxation subject to conditions.
• The ordinary turnover ceiling is ₹2 crore, increased to ₹3 crore where cash receipts do not exceed five per cent of total receipts under the applicable old-Act framework.
• Presumptive income is generally eight per cent of eligible turnover and six per cent for qualifying digital receipts, subject to the statutory rules.
• Specified professions, agency business, commission or brokerage and goods-carriage business under a separate scheme are not automatically eligible.
• Declaring lower profit can trigger books and tax-audit consequences where the statutory conditions are met; leaving the scheme can also create a five-year restriction under the old Act.

The five-point review

Practical example

How to apply the framework

Prepare turnover from books and source records before applying the percentage. Do not treat all bank credits as turnover.

Preserve the digital-versus-cash receipt analysis because it affects both the enhanced threshold and the six/eight per cent computation.

Filing-control workflow

Fix the tax period and statutory route

Identify the financial year, assessment year or tax year before using any threshold, form or section. Review person, activity and turnover together. A form filed in June 2026 for AY 2026–27 remains an old-Act filing, while an event occurring after 1 April 2026 can fall under the new Act.

Reconcile the commercial evidence

Start from contracts, invoices, bank statements, payroll, broker records, property documents and statutory certificates. Then reconcile AIS, TIS, Form 26AS, ITR schedules, tax payments and prior returns. Portal information can contain gross values, timing differences or reporting errors and should not replace primary evidence.

Test the live filing result

Review validation messages, selected regime, form acknowledgements, loss schedules, tax-credit matching and processed intimation. Preserve the filed JSON or form, computation, supporting schedules, transaction IDs and any correction request. A saved draft or payment debit is not proof that the statutory task is complete.

Implementation checkpoint

Before treating the filing step as complete, verify the live portal or processed outcome. Confirm the form and regime, taxable income, losses, tax credit, payment mapping, deduction schedule and acknowledgement. Record any remaining mismatch, responsible person and correction deadline. This check prevents a technically submitted return from preserving the wrong tax result.

Action checklist

• Confirm eligible person and activity.
• Reconcile turnover with GST/AIS/bank.
• Calculate cash percentage.
• Compute six/eight per cent bases.
• Review lower-profit and audit consequences.
• Save the option and evidence file.

Evidence to keep

• Sales register and invoices
• GST returns
• Bank/payment-gateway statements
• Cash book
• Presumptive computation

Warning signs

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