Presumptive Taxation 2026-27: The New Section 58 & 61 Playbook for Businesses, Professionals and Non-Residents
Presumptive taxation has always been one of the most practical compliance reliefs for small businesses, professionals, transport operators and certain non-residents. Under the Income-tax Act, 2025, applicable from 1 April 2026, the language, structure and section numbers have changed, but the core idea remains simple: eligible taxpayers may compute taxable business income on a prescribed percentage or fixed amount basis instead of maintaining detailed profit computation in every case. The new law uses the concept of “Tax Year”, and Tax Year 2026-27 corresponds to income earned during financial year 2026-27 under the new Act. The official FAQs also clarify that AY 2026-27 and Tax Year 2026-27 are different compliance periods—AY 2026-27 continues under the Income-tax Act, 1961 for FY 2025-26, while TY 2026-27 will be governed by the Income-tax Act, 2025.
Under the new Act, Section 58 deals with presumptive taxation for resident businesses, goods carriage operators and specified professionals. Section 61 deals with presumptive taxation for specified business activities of certain non-residents, such as shipping, cruise ships, aircraft operation, turnkey power projects, mineral oil services and electronics manufacturing-related services or technology.
For taxpayers, consultants and businesses preparing for the new regime, this article explains the practical impact of Section 58 and Section 61, with a comparative analysis of the Income-tax Act, 1961.
1. What is Presumptive Taxation?
Presumptive taxation is a simplified method of computing business or professional income. Instead of calculating actual net profit after every expense, the law presumes income at a fixed percentage of turnover or gross receipts, or at a fixed monthly amount in specified cases.
In simple words:
Presumptive taxation reduces compliance burden, but it does not mean tax-free income or no record keeping at all.
A taxpayer still needs to check eligibility, turnover limits, bank receipts, cash receipts, TDS, GST data, books of account requirements and audit implications.
For professional support in filing returns under the new tax framework, readers may refer to our ITR Filing Services for Individuals, Businesses and Professionals.
2. Section 58 of the Income-tax Act, 2025 – Presumptive Taxation for Residents
Section 58 covers three major categories:
- Eligible resident businesses
- Goods carriage businesses
- Specified professionals
The section provides that, for these eligible taxpayers, profits and gains shall be computed as per the prescribed table, and provisions relating to normal business income computation will not apply to the extent they are contrary to Section 58.
3. Section 58 for Small Businesses – Broadly Comparable to Old Section 44AD
For an eligible resident business, Section 58 provides presumptive income at:
| Nature of Receipts | Presumptive Income |
|---|---|
| Receipts through prescribed banking/digital modes | 6% |
| Other receipts, including cash receipts | 8% |
| Actual profit, if higher than presumptive amount | Higher actual profit |
The turnover limit is generally ₹2 crore. However, it increases to ₹3 crore where cash receipts do not exceed 5% of total turnover or gross receipts. Non-account-payee cheques and non-account-payee bank drafts are treated as cash for this purpose.
Who is an eligible assessee?
For normal business presumptive taxation under Section 58, an eligible assessee broadly means a resident:
- Individual
- Hindu Undivided Family
- Firm, other than LLP
However, the scheme is not available for certain persons, including those carrying on a specified profession, agency business, commission or brokerage business, or claiming specified deductions under Chapter VIII-C.
Practical Example
Suppose a resident trader has turnover of ₹2.80 crore in Tax Year 2026-27 and cash receipts are only ₹8 lakh. Since cash receipts are below 5%, the higher threshold of ₹3 crore may apply. If the eligible digital/banking receipts qualify for 6%, the taxpayer may compute income at the presumptive rate, subject to other conditions.
Businesses should also reconcile turnover with GST returns, bank statements and financial records. For regular bookkeeping, MIS and compliance support, readers may refer to our Accounting, Virtual CFO and Digital CFO Servicesand GST Registration & Return Filing Services.
4. Section 58 for Goods Carriage Business – Broadly Comparable to Old Section 44AE
For taxpayers engaged in the business of plying, hiring or leasing goods carriages, Section 58 provides presumptive income where the assessee owns not more than 10 goods carriages at any time during the tax year.
The presumptive income is:
| Type of Goods Carriage | Presumptive Income |
|---|---|
| Heavy goods vehicle | ₹1,000 per ton of gross vehicle weight or unladen weight for every month or part of a month |
| Other goods vehicle | ₹7,500 per month or part of a month |
| Actual profit, if higher | Higher actual profit |
A person purchasing goods carriages on hire purchase or instalment basis is deemed to be the owner for this provision.
Practical Example
If a transporter owns two heavy goods vehicles of 16 tons each for the entire tax year, presumptive income may be computed as:
2 vehicles × 16 tons × ₹1,000 × 12 months = ₹3,84,000
Actual profit, if higher, will be taxable instead.
5. Section 58 for Specified Professionals – Broadly Comparable to Old Section 44ADA
Specified professionals can compute income on presumptive basis at 50% of gross receipts, or actual profit if higher.
The gross receipts limit is:
| Case | Gross Receipts Limit |
|---|---|
| Normal limit | ₹50 lakh |
| Higher limit where cash receipts do not exceed 5% | ₹75 lakh |
Specified professions include legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology, company secretary and other notified professions.
Practical Example
A consultant earning professional receipts of ₹68 lakh entirely through banking channels may fall within the enhanced ₹75 lakh limit, subject to satisfaction of all conditions. Presumptive income may be computed at ₹34 lakh, unless actual profit is higher.
Professionals should carefully verify whether their activity is truly a specified profession or a business service, because wrong classification may lead to return processing issues, notices or audit exposure. For assistance, readers may use our Income-tax Act 1961 to Income-tax Act 2025 Section Finder and ITR Filing Services.
6. What if Actual Profit is Lower Than Presumptive Income?
Section 58 allows a taxpayer to declare income lower than the presumptive amount, but this comes with compliance consequences.
Where the taxpayer declares lower income and total income exceeds the maximum amount not chargeable to tax, the taxpayer must:
- Maintain books of account under Section 62; and
- Get accounts audited under Section 63.
The official guidance on Form No. 26 also indicates reporting where a person eligible for presumptive taxation claims lower profits than the prescribed presumptive income.
7. Five-Year Restriction After Opting Out
For eligible business taxpayers under Section 58, if a taxpayer declares income under the presumptive scheme for a tax year and then declares income not in accordance with the scheme in any of the next five tax years, the taxpayer may be restricted from claiming the presumptive scheme for five succeeding tax years.
This is similar in spirit to the lock-in/lock-out concept under old Section 44AD.
8. No Separate Deduction of Expenses or Depreciation
Once income is computed under the presumptive scheme, the taxpayer cannot separately claim deductions for business expenses against that presumptive income. Depreciation is deemed to have been allowed, and the written down value of assets is calculated accordingly.
This is an important point for businesses with heavy actual expenses. Presumptive taxation is beneficial only when the simplified computation is commercially and legally suitable.
Section 61 of the Income-tax Act, 2025 – Presumptive Taxation for Certain Non-Residents
Section 61 applies to specified business activities of certain non-residents. It is a consolidated presumptive framework for non-resident businesses such as shipping, cruise ships, aircraft operation, turnkey power projects, mineral oil services and electronics manufacturing-related services or technology.
This provision is particularly relevant for cross-border transactions, foreign companies, international shipping, aircraft operations, oil and gas services, and foreign technology/service providers working with Indian companies.
For non-resident payments, TDS and remittance documentation, readers may also refer to our Form 145 / Form 146 CA Certificate for Foreign Remittance Services and TDS Compliance under the Income-tax Act, 2025.
9. Section 61 Presumptive Rates for Non-Residents
| Specified Non-Resident Business | Presumptive Income |
|---|---|
| Operation of ships, other than cruise ships | 7.5% |
| Operation of cruise ships | 20% |
| Operation of aircraft | 5% |
| Foreign company engaged in civil construction, erection, testing or commissioning in certain turnkey power projects | 10% |
| Mineral oil exploration/production-related services or facilities | 10% |
| Services or technology for setting up electronics manufacturing facility or manufacturing electronic goods in India | 25% |
Section 61 also covers certain amounts paid, payable, received or deemed to be received in or outside India, depending on the nature of the specified business.
The old Act had separate provisions for several non-resident presumptive regimes, including sections such as 44B, 44BB, 44BBA, 44BBB, 44BBC and 44BBD. The Income-tax Department’s international business reference material lists these provisions, and the official new Bill navigator maps these regimes into the new Section 61 structure.
10. Can a Non-Resident Declare Lower Income Under Section 61?
This is a key difference from the general resident scheme.
Under Section 61, the option to claim lower actual profits with books and audit is specifically available for:
- Certain turnkey power project businesses; and
- Mineral oil exploration/production-related businesses.
For these cases, the non-resident must maintain books under Section 62 and get accounts audited under Section 63. Section 61 also restricts separate set-off of loss, allowance or deduction against presumptive income.
Comparative Analysis: Income-tax Act, 1961 vs Income-tax Act, 2025
| Particulars | Income-tax Act, 1961 | Income-tax Act, 2025 | Practical Impact |
|---|---|---|---|
| Period concept | Previous Year / Assessment Year | Tax Year | From 1 April 2026, TY 2026-27 applies for FY 2026-27 income |
| Small business presumptive scheme | Section 44AD | Section 58 | Broad structure retained with new section number |
| Professional presumptive scheme | Section 44ADA | Section 58 | 50% presumptive income concept retained |
| Goods carriage scheme | Section 44AE | Section 58 | Fixed amount method retained |
| Non-resident shipping, aircraft, mineral oil, turnkey projects etc. | Separate sections such as 44B, 44BB, 44BBA, 44BBB, 44BBC, 44BBD | Section 61 | Consolidated table-based structure |
| Books of account | Section 44AA | Section 62 | New section number and simplified structure |
| Tax audit | Section 44AB | Section 63 | Audit requirement continues in prescribed cases |
| Lower profit declaration | Books and audit required in specified cases | Books and audit required in specified cases | Careful decision needed before opting out |
| Cash receipt test | Relevant for enhanced limits | Relevant for enhanced limits | Banking and digital receipt discipline remains important |
Under the old Act, the Income-tax Department’s guidance for AY 2026-27 confirms the familiar rates of 8%/6% for eligible businesses, 50% for eligible professionals, and fixed monthly computation for goods carriage businesses. The new Act substantially carries forward these concepts under Section 58, with reorganised drafting and new section numbering. (Etds)
Practical Compliance Checklist for Tax Year 2026-27
Before selecting presumptive taxation for TY 2026-27, taxpayers should verify the following:
- Correct classification
Check whether the activity is business, specified profession, goods carriage business, or non-resident specified business. - Eligibility of taxpayer
Individual, HUF, firm, LLP, company and non-resident status must be examined separately. - Turnover or gross receipt limit
Verify ₹2 crore / ₹3 crore limit for business and ₹50 lakh / ₹75 lakh limit for profession. - Cash receipt percentage
Maintain clear evidence that cash receipts do not exceed 5% where higher threshold is claimed. - Banking trail and digital receipts
Preserve bank statements, UPI/payment gateway reports, invoices and ledger records. - GST reconciliation
Turnover reported in Income-tax Return should be reconciled with GST returns, where applicable. - TDS/TCS and AIS verification
Match receipts with Form 26AS, AIS/TIS and TDS credits before return filing. - Audit exposure
If actual profit is lower than presumptive income, check books and audit requirement under Sections 62 and 63. - Future lock-out impact
For small businesses, opting out of presumptive taxation after using it may affect eligibility for subsequent years. - Notice risk
Wrong reporting may result in processing mismatch, demand notice, defective return or scrutiny query.
For notice handling, rectification and response drafting, readers may refer to our Income Tax Demand Notice Reply & Response Services.
FAQs on Presumptive Taxation for Tax Year 2026-27
1. Is Tax Year 2026-27 the same as Assessment Year 2026-27?
No. This is a very important transition point. AY 2026-27 relates to income of FY 2025-26 and continues under the Income-tax Act, 1961. Tax Year 2026-27 relates to income of FY 2026-27 and will be governed by the Income-tax Act, 2025.
2. Which section covers presumptive taxation for small businesses under the Income-tax Act, 2025?
Section 58 covers presumptive taxation for eligible resident businesses. It broadly corresponds to the old Section 44AD framework.
3. What is the presumptive rate for eligible businesses under Section 58?
The rate is generally 8%, but 6% applies to eligible receipts received through prescribed banking or digital modes.
4. What is the turnover limit for Section 58 business presumptive taxation?
The normal turnover limit is ₹2 crore. It may increase to ₹3 crore where cash receipts do not exceed 5% of total turnover or gross receipts.
5. Can an LLP use Section 58 for normal business presumptive taxation?
For normal eligible business and specified professional presumptive taxation under Section 58, LLPs are not included in the eligible category. However, goods carriage provisions use separate language and must be examined independently based on facts.
6. What is the presumptive rate for professionals under Section 58?
For eligible specified professionals, presumptive income is 50% of gross receipts, or actual profit if higher.
7. What is the gross receipts limit for professionals?
The normal limit is ₹50 lakh, which may increase to ₹75 lakh where cash receipts do not exceed 5% of total gross receipts.
8. Are expenses separately allowed after declaring presumptive income?
No. Once income is computed under Section 58 or Section 61 on presumptive basis, separate deduction of expenses is not allowed against that presumptive income.
9. Is depreciation separately available?
No separate depreciation deduction is allowed against presumptive income. However, depreciation is deemed to have been allowed for calculating written down value.
10. What happens if actual profit is lower than presumptive income?
In specified cases, the taxpayer may declare lower income, but books of account and audit requirements may apply under Sections 62 and 63.
11. Is GST registration avoided if income tax is filed under presumptive taxation?
No. Presumptive taxation is only an income-tax computation mechanism. GST registration, GST returns, e-invoicing, TDS and other compliance requirements must be checked separately.
12. What does Section 61 cover?
Section 61 covers presumptive taxation for specified non-resident businesses such as shipping, cruise ships, aircraft operation, turnkey power projects, mineral oil services and electronics manufacturing-related services or technology.
13. Does Section 61 apply to every non-resident?
No. It applies only to specified business activities mentioned in Section 61.
14. Can non-residents claim lower profit than Section 61 presumptive income?
For certain turnkey power project and mineral oil-related businesses, lower actual profits may be claimed if books are maintained and accounts are audited. This option is not generally available for every category under Section 61.
15. Should taxpayers blindly choose presumptive taxation?
No. Presumptive taxation is useful where it reduces compliance and reflects commercial reality. But where actual margins are low, expenses are high, or future audit exposure is likely, the decision should be taken after proper review.
Final Takeaway
The Income-tax Act, 2025 has reorganised presumptive taxation into a cleaner structure. Section 58 is the key provision for resident businesses, transporters and specified professionals. Section 61 is the key provision for specified non-resident businesses.
For many taxpayers, the scheme will continue to offer simplicity. However, the choice must be made carefully after checking:
- Nature of taxpayer
- Nature of activity
- Turnover or gross receipts
- Cash receipt percentage
- Books and audit implications
- GST, TDS and AIS reconciliation
- Future lock-out impact
For professional assistance in selecting the correct tax regime, preparing books, filing ITR, handling TDS/remittance issues or responding to income-tax notices, you may connect with CA Alok Kumar through Schedule Appointment.
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