Section 58, Income-tax Act 2025: Computing profits and gains of business or profession on presumptive basis

What changed when 44AD, 44ADA and 44AE became Section 58?

Almost nothing changed in the numbers, and quite a lot changed in the plumbing. The rates, the turnover limits and the digital-receipts discount all carried over intact. What the 2025 Act did is consolidation: three separate sections became one section built around a table, with each scheme as a row. Where a 44AD taxpayer, a 44ADA professional and a 44AE transporter used to read three different provisions, all of them now read Section 58.

The cross-references moved too, and they matter in practice. Book-keeping and audit obligations, which lived in Sections 44AA and 44AB, are now Sections 62 and 63. The return deadline reference is Section 263(1), previously 139(1). And the Act says "tax year" where the old law juggled "previous year" and "assessment year", so there is one label to track instead of two.

One wording change may have teeth: practitioner analyses read Section 58 as barring the set-off of losses and other deductions against presumptive income, which the 1961 Act permitted in defined cases. The deductions section below covers it; the reading is pending CA verification against the Gazette text.†

Who can use Section 58, and who cannot?

Residents only: resident individuals, Hindu Undivided Families and partnership firms. LLPs and non-residents are out, whatever their size. Beyond that, eligibility follows the row of the table you fall in:

• Small businesses (the scheme you knew as 44AD): any business except plying goods vehicles, with turnover up to ₹2 crore, or ₹3 crore where cash receipts stay within 5% of the total. Commission and brokerage earners and agency businesses are excluded.
• Specified professionals (old 44ADA): the professions listed for book-keeping rules, now Section 62(4): legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration and other notified professions, with gross receipts up to ₹50 lakh, or ₹75 lakh under the same 95%-digital condition.
• Goods transporters (old 44AE): owners of up to 10 goods vehicles at any time in the year, declaring a fixed amount per vehicle per month.

A salaried person with a side practice or business can use the scheme for that side income; salary stays taxed as salary either way.

What are the rates, limits and the digital discount?

The digital discount is worth real money. Payment received by bank transfer, UPI or card is deemed profitable at 6% instead of 8%, a quarter off the taxable base for a business. Receipts count as digital if they arrive during the tax year or before the return's due date.

† The per-vehicle transport amounts shown are the figures carried from Section 44AE and are pending CA verification against the 2025 Act's table.

How do you calculate presumptive income?

The worked examples below run these steps for a freelancer, a shop and a transporter.

Four steps, no books required:

• Total your turnover or gross receipts for the tax year. A business splits cash receipts from digital ones.
• Apply your row's rate: 6% and 8% for business turnover, 50% for professional receipts, the per-vehicle amounts for transport.
• The result is your income from that business or profession. You may declare a higher figure if you actually earned more; declaring a lower one pulls you out of the scheme and into books and audit.
• Add your other income (salary, interest, rent, capital gains), then apply your regime's slabs, deductions and rebate as usual.

Which expenses and deductions survive the scheme?

No business expense is separately deductible: the presumptive percentage is deemed to cover all of them, including depreciation. Your assets' written-down values still reduce each year in the background as if depreciation had been claimed, which matters later when you sell an asset or leave the scheme.

Personal tax deductions are a different layer and survive intact on the old regime. Presumptive income joins your total income first; the Chapter VIII deductions (the investment basket now numbered Section 123, health premiums and the rest) then apply if you have opted out of the default new regime.

The change to watch: analyses of Section 58's text read it as blocking the set-off of losses and other Act deductions against presumptive income. Under the 1961 Act, a brought-forward business loss could reduce 44AD income. On ₹2 crore of turnover declaring ₹12 lakh, an old ₹2 lakh loss set-off left ₹10 lakh taxable; on the new reading the full ₹12 lakh stands. If you carry losses, this single change can decide the scheme against you.

The loss set-off reading is from practitioner analyses of the enacted text and is pending CA verification against the Gazette copy.†

What is the five-year lock-out rule?

Leave the scheme and you cannot come back for five tax years. If you used presumptive taxation and later declare profit below the presumptive rate (while your total income exceeds the basic exemption), the scheme is closed to you for the five following tax years. For those years you maintain books of account under Section 62 and get audited under Section 63.

The rule exists to stop switching: presumptive in fat years, real books in lean ones. Enter only if the deemed profit is livable for the medium term, and treat an exit as a one-way door.

How does advance tax work under Section 58?

One installment instead of four. A presumptive taxpayer pays the entire year's advance tax by 15 March, instead of the June, September, December and March quarters everyone else follows. Pay late or short and interest runs from that date.

For a freelancer used to clients deducting TDS, this is the discipline the scheme asks in return for zero book-keeping: set aside tax through the year and clear it by mid-March. The advance tax calculator linked below does the arithmetic for your figures.

The single-installment rule carries over from the 1961 Act (Section 211); its 2025-Act section number is pending verification.†

Which ITR form do you file?

ITR-4 (Sugam), the short presumptive return, for the returns being filed now under the 1961 Act (FY 2025-26). It covers resident individuals, HUFs and firms with total income up to ₹50 lakh including presumptive income. Cross ₹50 lakh of total income, hold foreign assets, or book capital gains beyond the small limits ITR-4 accepts, and you file ITR-3 instead, still using the presumptive computation.

Return forms for the first 2025-Act filings (TY 2026-27, filed in 2027) are yet to be notified. The ITR form finder linked below stays current as they land.

Should you pick Section 58 or keep real books?

Real books win when margins are thinner than the deemed rate (a distributor on 3% margins would pay tax on 6% to 8% under the scheme), when you carry losses you need to set off, or when turnover will cross the ceiling anyway. Run both routes through the presumptive calculator before choosing; the five-year lock-out makes this a decision to get right the first time.

The scheme wins when:

• Your real expenses are below the deemed rate: a consultant whose costs run 20% of receipts pays tax on 50% and still comes out ahead of maintaining audited books.
• You want zero compliance: no ledgers, no audit, one advance-tax date, the short ITR-4 return.
• Your receipts are digital: the 6% business rate beats the 8% cash rate by a quarter.
• Your income is stable and comfortably inside the limits.

How does Section 58 interact with the new tax regime?

They are independent choices. Section 58 fixes how your business income is computed; the regime fixes which slabs and deductions then apply to your total income. A presumptive freelancer on the default new regime gets the ₹4 lakh nil slab and the rebate that zeroes tax up to ₹12 lakh of income like anyone else; on the old regime, the Section 123 investment basket and its siblings apply. The switching rules for taxpayers with business income (Form 10-IEA, essentially one lifetime return to the new regime after opting out) apply to presumptive taxpayers too.

Worked examples

Section 58 FAQs

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