The newly enacted Income Tax Act, 2025, marks a significant step toward simplification by consolidating multiple presumptive taxation schemes into a single, streamlined framework. Section 58 of the new Act merges the provisions previously found in sections 44AD, 44ADA, and 44AE of the 1961 Act, creating a uniform regime for small businesses, professionals, and transport operators.
This unified approach aims to reduce compliance burdens, encourage digital transactions, and provide clearer guardrails for taxpayers opting for the presumptive scheme.
Here is a breakdown of the key components of Section 58.
1. Presumptive Income for Small Businesses
This category is designed for very small enterprises to simplify their tax computation and maintain minimal books of records.
Eligibility: The scheme is available to Resident Individuals, Hindu Undivided Families (HUFs), and Partnerships Firms (excluding LLPs).
Turnover Thresholds: A taxpayer is eligible if their turnover does not exceed:
₹2 Crore generally.
₹3 Crore if the cash receipts from turnover are 5% or less, incentivizing digital payments.
Deemed Income Rate: Profits are presumed at a fixed percentage of turnover:
6% for turnover received through digital modes.
8% for turnover received in cash.
The taxpayer always has the option to declare actual profits, if higher than the prescribed rates.
5-Year Lock-in: Once a taxpayer opts for this scheme, they must continue with it for five consecutive years to prevent frequent switching.
2. Presumptive Income for Goods Carriage Operators (Transporters)
A separate, simplified mechanism is provided for small fleet owners.
Eligibility: Available to any taxpayer owning up to 10 goods carriages at any time during the year.
Deemed Income Rates: Income is calculated per vehicle on a monthly basis:
₹1,000 per ton of gross vehicle weight for heavy vehicles (weighing more than 12,000 kg).
₹7,500 per vehicle for all other vehicles.
Part of a Month: A vehicle plying for even a part of a month is treated as being used for the full month for calculating the deemed income.
No Lock-in Period: Unlike the business category, transporters are not subject to a 5-year lock-in.
3. Presumptive Income for Specified Professionals
This section extends the presumptive benefit to professionals in specified fields (e.g., medical, legal, engineering, architectural, etc.).
Receipts Thresholds: Professionals are eligible if their gross receipts do not exceed:
₹50 Lakhs generally.
₹75 Lakhs if the cash receipts are 5% or less.
Deemed Income Rate: Profits are presumed at 50% of the gross receipts. However, professionals can choose to declare income at a higher rate if their actual profits exceed 50%.
Common Provisions Across All Categories
To maintain consistency, Section 58 establishes uniform rules that apply to all taxpayers under the presumptive scheme:
No Separate Deductions: Once the presumptive income is declared, taxpayers are not allowed to claim any further deductions for business or professional expenses.
Deemed Depreciation: While specific depreciation is not deductible, the written down value (WDV) of assets is deemed to have been allowed as a deduction for future tax calculations.
Overriding Effect: The provisions of this section override the general provisions for computing business income (Sections 26–54 of the new Act).
Retained Deductions: Crucially, taxpayers under this scheme are still eligible to claim deductions under Chapter VI-A (such as investments in PPF, life insurance, etc.).
Key Insight: A Smarter, Simpler Regime
Section 58 represents a thoughtful evolution of India's presumptive taxation framework. By merging disparate sections, it eliminates confusion and creates a single point of reference for small taxpayers. The tiered thresholds that reward lower cash transactions are a clear policy push toward a less-cash economy, while the flexible options to declare higher actual profits ensure that the provisions cannot be used to underreport income. Overall, the new section enhances compliance simplicity and provides a more coherent structure for India's vast small taxpayer base
No comments:
Post a Comment