Presumptive Taxation under New Income Tax Act-2025

INTRODUCTION

As under Old Income Tax Act 1961, Section 44AD/ADA/AE was dealing with the presumptive taxation but now onwards, i.e., from Tax Year 26-27 onwards the Income Tax act 2025 will be in effect

So, the question arises, what are the provisions for presumptive taxation & how will it be dealt with the new act? Let’s decode it

There are two sections dealing with presumptive taxation under the new act

1. Section 58 (Presumptive for Residents)
2. Section 61 (Presumptive for Non-residents)

Let’s check out one by one

Section 58: Special provision for computing profits and gains of business or profession on presumptive basis in case of certain residents.

(Similar to section 44AD/ADA/AE under IT ACT 1961)

• Eligible Assessee means an individual, a Hindu undivided family, or a firm other than a limited liability partnership, who is resident in India, and who:

(i) has not claimed any deduction under Chapter VIII-C for the relevant tax year;

(ii) does not carry on specified profession as defined in section 62(4)

(iii) does not earn any income in the nature of commission or broke-rage

(iv) does not carry on any agency business

• Specified Assessee means an individual or a firm, other than a limited liability partnership, who is a resident in India;

POINTS TO KEEP IN MIND:

• Any loss, allowance or deduction allowable under the provisions of this Act, shall not be allowed against the income computed in the manner specified above.
• If an Eligible Assessee opt in but then declare lower profit in any of the next 5 years then it will be banned from using Section 58 for 5 years after that year & once its break the assessee will have to maintain the Books of Accounts us 62 & will have to get audited us 63 of the act.
• If the transport business is a firm, salary and interest paid to partners can still be deducted, subject to Section 35(e) limits.
• Cheques or bank drafts that are not account payee are treated as cash receipts- they won’t help you qualify for the ₹3 crore / ₹75 lakh limit.

Section: 61 Special provision for computation of income on presumptive basis in respect of certain business activities of certain non-residents.

(Similar to section 44BB/44BBA/44BBB/44BBC/44BBD under IT ACT 1961)

POINTS TO KEEP IN MIND:

• No deductions for losses or expenses are allowed against income computed as above
• If an Assessee believes actual profits are lower than the presumptive amount, they may claim lower profits by maintaining proper books of account and getting them audited.
• The word ‘plant’ includes ships, aircraft, vehicles, drilling units, scientific apparatuses and equipment’s used for the purposes of the specified business. (Sl. No 5)
• The resident company must be operating under a scheme notified by the Central Government (Ministry of Electronics & IT) and must meet the prescribed conditions. (Sl. No 6)