Industry Odisha Bureau, Aug 22: Since handling the formal tax compliance and maintaining the requisite financial records turn out to be a complicated affair for the self-employed individuals, especially for the small businesses and professionals, financial experts have reportedly suggested for the ‘Presumptive Taxation’ as it is claimed to be offering a simpler alternative.
Talking about the purpose of the ‘Presumptive Taxation’, financial experts have reportedly stated that, “It is a simplified tax scheme under the Income Tax Act, 1961 (and consolidated under Section 58 of the Income Tax Act, 2025 from Tax Year 2026‑27). It reduces compliance burden for small taxpayers by eliminating the need for detailed bookkeeping and audits while ensuring a simplified, predictable tax calculation. It allows eligible small businesses and professionals in India to declare income at fixed rates of 8% of annual turnover or 6% digital, i.e. receipts through banking channels or digital modes, under ‘Section 44AD’ and 50% under ‘Section 44ADA’, without maintaining detailed books or undergoing audit.”
According to the financial experts, “The ‘Section 44AD’ is applicable for small businesses, resident individuals, Hindu Undivided Families (HUFs), partnership firms (not Limited Liability Partnerships (LLPs), while the annual turnover limit is up to Rs 3 crore (if 95% digital), otherwise Rs 2 crore, and the compliance relief is no detailed books or audit required. But, not eligible to ‘commission/brokerage businesses’, ‘agency businesses’, and ‘goods carriage businesses’ covered under ‘Section 44AE’.”
Accordingly, “The ‘Section 44ADA’ is applicable for doctors, lawyers, architects, engineers, accountants, technical consultants, etc., while the presumptive income is 50% of gross receipts, and the receipt limits are up to Rs 75 lakh (if 95% digital), otherwise the receipt limit is Rs 50 lakh. Salary/Commission from a partnership firm is not treated as professional receipts, and partners cannot claim 44ADA on such income.”
Similarly, “The ‘Section 44AE’ is applicable for the goods transport operators, i.e. owners of up to 10 goods carriages, while the presumptive income is slated to be Rs 7,500 per vehicle per month (light vehicles) and Rs 1,000 per ton per month (heavy vehicles).”
On the key compliance rules, the financial experts have reportedly explained that, “The ITR-4 (Sugam) Form is meant for the 44AD/44ADA/44AE users, while the entire amount payable in one installment is by March 15. If one seeks to opt out of 44AD by declaring lower income than the presumptive rates, one must maintain books and get audited for the next five years. Even under the presumptive taxation, unexplained bank deposits can be examined, because presumptive income does not shield suspicious credits.”
