Presumptive Taxation Scheme – TAX VIC

Section 58 Explained: Key Changes in Presumptive Taxation Under Budget 2025

TAXVIC — Wed, 07 May 2025 12:29:34 +0000

The Union Budget 2025 has introduced significant reforms in the presumptive taxation regime by proposing Section 58 in the Income Tax Act. This new section aims to consolidate and replace Sections 44AD, 44ADA, and 44AE, simplifying tax compliance for small businesses, professionals, and transport operators.

This article delves into Section 58’s key features, applicability, benefits, and implications for resident and non-resident taxpayers.

What is Section 58?

Section 58 is a proposed provision in the Income Tax Bill, 2025, designed to streamline the presumptive taxation schemes for:

Small businesses
Specified professionals
Transport operators

Section 58 aims to provide a more cohesive framework for taxpayers opting for presumptive taxation by unifying the earlier provisions under Sections 44AD, 44ADA, and 44AE.

Key Features of Section 58

1. Applicability

Section 58 applies to:

Resident individuals, Hindu Undivided Families (HUFs), and partnership firms (excluding LLPs) engaged in eligible businesses or professions.
Non-resident individuals engaged in specified activities under certain conditions.

2. Turnover Thresholds

Businesses:
- Turnover up to ₹2 crore.
- Extended to ₹3 crore if cash receipts do not exceed 5% of total turnover.
Professionals:
- Gross receipts up to ₹50 lakh.
- Extended to ₹75 lakh if cash receipts do not exceed 5% of total receipts

3. Presumptive Income Rates

Businesses:
- 8% of total turnover or gross receipts.
- 6% if receipts are through digital modes.
Professionals:
- 50% of total gross receipts.
Transport Operators:
- ₹1,000 per ton of gross vehicle weight for each month or part thereof during which the goods carriage is owned.

4. Higher of Presumptive Income or Actual Profit

Taxpayers must declare income as the higher of: The presumptive income calculated per the specified rates.

The actual profit earned.

The higher amount must be declared if the actual profit exceeds the presumptive income.

5. Maintenance of Books and Audit Requirements

Taxpayers opting for presumptive taxation under Section 58 are not required to:

Maintain detailed books of accounts.
Undergo audit under Section 44AB.

However, if a taxpayer declares income lower than the presumptive income and their total income exceeds the basic exemption limit, they must:

Maintain books of accounts as per Section 44AA.
Get the accounts audited under Section 44AB.

6. Lock-in Period

Once a taxpayer opts for presumptive taxation under Section 58, they must continue to do so for five consecutive assessment years. If they opt out before this period, they cannot avail themselves of the scheme for the next five years.

Presumptive Taxation for Non-Resident Individuals (NRIs)

While Section 58 primarily applies to resident taxpayers, the Income Tax Bill, 2025, has introduced Section 44BBD, a presumptive taxation scheme specifically for non-resident individuals providing services or technology in India for setting up electronics manufacturing facilities.

Key Features of Section 44BBD

Applicability:
- Non-residents providing services or technology to a resident company establishing or operating an electronics manufacturing facility in India.
Presumptive Income:
- 25% of the total amount received or receivable is deemed as business income.
Tax Rate:
- Effective tax payable is less than 10% on gross receipts.

This provision aims to provide tax certainty and simplify compliance for non-residents engaged in specified activities in India.

Benefits of Section 58

Simplified Compliance:
- Reduced the burden of maintaining detailed books and undergoing audits.
Encouragement of Digital Transactions:
- Lower presumptive rates for digital receipts promote cashless transactions.
Clarity and Uniformity:
- Consolidation of previous sections into a single provision simplifies understanding and application.

Considerations Before Opting for Section 58

Actual Profit vs. Presumptive Income:
- If actual profits are consistently lower than the presumptive income, regular taxation may be more beneficial.
Ineligibility for Certain Deductions:
- Taxpayers cannot claim deductions under Sections 30 to 38 if they opt for presumptive taxation.
Lock-in Period:
- Opting out before the completion of five years restricts the ability to re-enter the scheme for the next five years.

The introduction of Section 58 in the Income Tax Bill, 2025, marks a significant step towards simplifying tax compliance for small businesses, professionals, and transport operators in India. By consolidating existing provisions and introducing clear guidelines, the government aims to make the tax system more accessible and less burdensome for eligible taxpayers.

The new Section 44BBD offers a simplified taxation regime for non-resident individuals engaged in specified activities, promoting ease of doing business in India.

Need assistance in understanding how these changes impact you?
Contact Tax Vic for personalized tax and compliance solutions.

Note: The Income-Tax Bill, 2025, which aims to replace the Income-Tax Act, 1961, was introduced in the Lok Sabha on February 13, 2025. This bill primarily seeks to simplify the language and remove redundant provisions, while retaining most of the existing tax rates and definitions .As of now, it has not yet been passed by Parliament. Therefore, the Income-Tax Bill, 2025 remains under consideration. If enacted, the Income-Tax Bill, 2025 is proposed to come into effect on April 1, 2026.

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Section 44AB: Tax Audit under Income Tax

TAXVIC — Mon, 28 Aug 2023 09:44:43 +0000

As tax season approaches, individuals and businesses must be familiar with the numerous requirements of the Income Tax Act in order to ensure compliance and avoid penalties. The obligation for a tax audit under Section 44AB of the Income Tax Act is one of the important issues that taxpayers should be aware of. In this blog, we’ll go through who requires a tax audit, the procedure, timelines, fines for noncompliance, and more. Tax Vic provides tax audit services with the help of expert professionals at a reasonable rate. Let’s understand the tax audit.

Tax Audit under Section 44AB of IT Act

Section 44AB of the Income Tax Act of 1961 requires tax audits for certain people and corporations. A tax audit is simply a Chartered Accountant (CA) inspection of a taxpayer’s financial accounts to guarantee correctness and compliance with tax rules.

Tax audits are necessary for the following taxpayer categories:

Businesses

If you own a business with gross turnover of more than Rs. 1 crore, you must have your accounts audited under Section 44AB. If cash transactions are less than 5% then the threshold is 10 crores.

Professionals

Professionals such as engineers, doctors, lawyers, and architects, among others, are subject to tax examination if their gross receipts surpass Rs. 50 lakhs in a financial year.

Presumptive Taxation Scheme

If your business opts for the presumptive taxation system described in Sections 44AD, 44ADA, or 44AE, and the profit declared is less than specified limit, a tax audit becomes mandatory.

Procedure for Tax Audit

A tax audit requires numerous processes to ensure a thorough examination of financial information. Here’s a rundown of the procedure:

Appointment of Chartered Accountant (CA)

A qualified CA has to be appointed by the taxpayer to undertake the tax audit.

Documents Submission

All relevant financial papers, including audited balance sheets, profit and loss statements, books of accounts, bank statements, and other appropriate records, are provided to the CA by the taxpayer.

Audit and Verification

The CA evaluates the submitted documentation and validates the financial statements’ accuracy. They verify that accounting standards and tax rules are followed.

Audit Report Preparation

The CA generates an audit report based on the examination using Form 3CA/3CB and Form 3CD, as stipulated by the Income Tax Department.

Filing of Audit Report

The audit report, along with the specified forms, is electronically filed with the Income Tax Department by the due date.

Deadline for Tax Audit

In most cases, the deadline for filing the tax audit report under Section 44AB is the same as the deadline for filing the income tax return. Specific dates, however, may vary depending on the taxpayer’s categorization and other considerations. The following is a simplified table explaining the deadlines:

Category	Due Date for Tax Audit
Businesses	September 30
Professionals	September 30
Presumptive Scheme	September 30

Penalties for Non-compliance

Noncompliance with tax audit requirements may result in the following fines under the Income Tax Act:

Late Filing Penalty

Failure to file the tax audit report on time may result in a penalty of 0.5% of total turnover or gross receipts, up to Rs. 1,50,000.

Inaccurate Reporting

If the audit report contains incorrect information or errors, a penalty of 150% of the under-reported tax may be imposed.

Non-Maintenance of Books

A penalty of Rs. 25,000 might be imposed if books of accounts are not kept as required by law.

It is crucial to know that the CA’s tax audit report may be investigated by the Income Tax Department. As a result, keeping correct records, adhering to accounting standards, and complying with tax requirements are paramount.

Conclusion

To summarize, understanding Section 44AB of the Income Tax Act is critical for people and businesses to avoid penalties and ensure smooth tax compliance. If you fall into one of the above categories, you should seek the advice of a skilled Chartered Accountant to guide you through the tax audit process and ensure correct financial reporting. Remember that remaining aware and compliant might help you avoid unwanted legal issues and financial damages.

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