The presumptive scheme lets a small business or professional declare a fixed share of receipts as profit and be done — no books to maintain for tax, no audit, one advance-tax instalment. For a business that clears more than that share, it is a genuine saving of tax and of trouble. For one that clears less, it is a trap. Both cases are common.
Who can use it
As reviewed on 16 September 2026, under section 58 of the 2025 Act (formerly sections 44AD and 44ADA of the 1961 Act):
| Small business | Professional | |
|---|---|---|
| Who | Resident individual, HUF or partnership firm (not LLP) carrying on a business other than agency, commission or goods carriage | Resident individual or partnership firm in a notified profession — legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration and others notified |
| Receipts limit | ₹2 crore; ₹3 crore if cash receipts are 5% or less of the total | ₹50 lakh; ₹75 lakh if cash receipts are 5% or less |
| Deemed profit | 8% of receipts; 6% for receipts through the bank or digital channels | 50% of receipts |
| Books and audit | Not required for income-tax purposes | Not required for income-tax purposes |
You may declare more than the deemed share — you cannot declare less without maintaining books and, above the audit limits, getting them audited.
What it saves
A shop with ₹80 lakh of receipts, 90% through the bank, declares about ₹5.1 lakh of profit and pays tax on that under whichever regime it chooses. If its real margin is 12%, the scheme has taxed it on half its profit, lawfully. If its real margin is 4%, the scheme has taxed it on double its profit, also lawfully. The scheme is a bargain for high-margin businesses and a cost for thin-margin ones. A professional at 50% has less room: the deemed rate is high, and many professionals with staff and rent earn less than that.
The trap in opting out
A business that uses the scheme and then declares a lower profit in a later year is locked out for the next five years and must keep books and, where the limits apply, get them audited throughout, as reviewed on 16 September 2026. Professionals are not subject to the five-year lock in the same way, but the audit requirement applies from the year they declare less. The decision is therefore not annual: opt in only if you expect to stay in.
What it does not remove
- GST. Entirely separate. Presumptive income-tax and GST records are different questions, and GST does require records.
- TDS you must deduct. If you are liable to deduct tax on payments you make, the scheme changes nothing — see the note on TDS for small businesses.
- Records for your own purposes. The bank still wants accounts for a loan, and a buyer of the business wants more than a tax return.
Advance tax: one instalment
Ordinary taxpayers pay advance tax in four instalments — 15%, 45%, 75% and 100% by 15 June, 15 September, 15 December and 15 March. A presumptive taxpayer pays the whole amount in one instalment by 15 March. Miss it and interest runs from 1 April. The advance tax calculator handles both patterns.
This note is general information, not advice on anyone's facts. Send an enquiry about a specific matter.