New Income Tax Act Section 58: presumptive taxation for business and profession – technical overview
The new Income Tax Act consolidates presumptive taxation provisions into **Section 58 – Special provision for computing profits and gains of business or profession on presumptive basis in case of certain residents**.
Section 58 broadly replaces the structure of sections **44AD, 44ADA and 44AE** from the old Act, but with updated turnover thresholds, a cash‑receipt test and several clarifications.
This note provides a practitioner‑oriented overview of Section 58, focusing on:
- scope and overriding effect,
- structure of the presumptive schemes for business, transport and specified professions,
- conditions for eligibility,
- interaction with books and audit provisions (new sections 62 and 63), and
- practical issues that CAs, CS and tax practitioners should track in client implementation.
> Disclaimer: This article is an educational summary based on the text of Section 58 as available at the time of writing. Professionals must rely on the finally notified Act, rules and CBDT circulars/press releases for authoritative positions.
1. Overriding scope – carve‑out from normal computation
Section 58(1) provides that **sections 26 to 54**, to the extent contrary to Section 58, **shall not apply** to the manner of computation of profits and gains of specified business or profession covered by sub‑section (2).
In effect, where presumptive computation under Section 58(2) applies:
- computation provisions for business/profession income in sections 26–54 are overridden,
- subject to the specific deeming and limitation rules in Section 58.
2. Structure of the Section 58(2) Table
Sub‑section (2) contains a **Table for three categories**:
1. **Sl. No. 1** – Any business (other than goods carriage) for eligible resident assessees.
2. **Sl. No. 2** – Business of plying, hiring or leasing goods carriages.
3. **Sl. No. 3** – Specified professions as referred to in Section 62(4) for specified assessees.
For each serial number, the Table prescribes:
- **Specified business/profession (Column B)**,
- **Eligible assessee (Column C)**,
- **Turnover/gross receipt limits (Column D)**, and
- **Manner of presumptive computation (Column E)**.
The profits so computed are **deemed to be the profits and gains** chargeable under the head “Profits and gains of business or profession”.
3. Sl. No. 1 – presumptive business income (successor of 44AD)
3.1 Eligible assessee and turnover thresholds
Column B covers *“any business other than the business specified against serial number 2”*.
Column C requires the assessee to be an **”eligible assessee”** (defined later in Section 58(11)), broadly:
- an individual, HUF or firm **other than LLP**, resident in India, who:
- has not claimed deduction under the specified section 144,
- has not claimed deductions under Chapter VIII‑C for the relevant year,
- does not carry on specified profession as per Section 62(4),
- does not earn commission or brokerage income, and
- does not carry on an agency business.
Column D prescribes two alternative turnover limits for the tax year:
- **≤ ₹2 crore**, or
- **≤ ₹3 crore**, where **cash receipts** (amount or aggregate of amounts received **in cash**) do not exceed **5%** of total turnover/gross receipts.
Sub‑section (9) clarifies that **non‑account‑payee cheques or drafts are deemed to be cash receipts** for this 5% test.
3.2 Deemed profit percentages – 6% / 8%
Column E prescribes that profits and gains are deemed to be the aggregate of:
- **6%** of **turnover/gross receipts received via specified banking or online modes** during the tax year or before the due date under Section 263(1); and
- **8%** of **remaining turnover/gross receipts**, i.e. turnover not so received;
**or** the **profit claimed to have been actually earned**, whichever is higher.
This closely tracks the 6%/8% framework of old Section 44AD, with explicit reference to digital receipts vs other receipts.
4. Sl. No. 2 – goods carriage business (successor of 44AE)
4.1 Scope and ownership test
Column B covers *“business of plying, hiring or leasing goods carriage”*.
The assessee must **own not more than 10 goods carriages at any time during the tax year**. Ownership is defined in Section 58(11)(f) to include vehicles held under hire purchase or instalment arrangements where payments are still due.
Definitions of “goods carriage”, “gross vehicle weight”, “unladen weight” and “heavy goods vehicle” are aligned with the **Motor Vehicles Act, 1988** (Section 58(11)(d)–(e)).
4.2 Presumptive quantum
Column E provides that presumptive income is the aggregate of:
- For **heavy goods vehicles** (gross vehicle weight > 12,000 kg):
- **₹1,000 per ton** of gross vehicle weight or unladen weight per vehicle **per month or part thereof** of ownership.
- For **other goods carriages**:
- **₹7,500 per vehicle per month or part thereof** of ownership.
Or, again, the **higher actual profit** claimed.
4.3 Firms – partner salary and interest
Section 58(5) specifically provides that where the assessee is a **firm**, salary and interest paid to partners shall be **deducted from income computed under sub‑section (1)** (read with Sl. No. 2) **subject to conditions and limits of Section 35(e)** (the new analogue for partner remuneration limits).
4.4 Interaction with books and audit
Section 58(10) carves out the goods carriage business from the general books and audit requirements:
- Provisions of Sections 62 and 63 **do not apply** as far as they relate to this business.
- While computing monetary limits under Sections 62/63, **gross receipts/income from this business are excluded**.
This is an important relaxation for small transporters.
5. Sl. No. 3 – presumptive scheme for specified professions (successor of 44ADA)
5.1 Specified profession and assessee
Column B covers **specified professions** as per Section 62(4) (expected to align with traditional list: legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration and notified others).
Column C requires a **”specified assessee”** – defined in Section 58(11)(b) as:
- an individual or firm, **other than LLP**, resident in India.
5.2 Gross receipt thresholds
Column D prescribes that gross receipts must:
- **not exceed ₹50 lakh**, or
- **not exceed ₹75 lakh**, where **cash receipts** do not exceed **5%** of gross receipts.
Again, any non‑account‑payee cheque/draft is treated as cash via sub‑section (9).
5.3 Deemed profit percentage
Column E provides a simple rule:
- presumptive income is **50% of gross receipts**, or
- **profit actually claimed**, whichever is higher.
Professionals desiring to declare profit lower than 50% (and whose total income exceeds the basic exemption limit) must maintain books and get audit – see next section.
6. Lower‑than‑presumptive profit and mandatory audit
Section 58(3) addresses the situation where the assessee claims that actual profits are lower than presumptive amounts under the Table and has taxable income.
Where:
- the assessee **claims lower profit** than that computed under Column E, **and**
- **total income exceeds** the basic exemption limit,
then the assessee is required to:
1. **keep and maintain books of account** under Section 62; and
2. **get the accounts audited and furnish audit report** under Section 63.
This is similar in concept to existing 44AD(5)/44ADA audit triggers.
7. Bar on further deductions and treatment of depreciation
7.1 No further allowances against presumptive income
Section 58(4) provides that **no loss, allowance or deduction** allowable under the Act shall be allowed **against income computed under sub‑section (2)**.
Thus, once presumptive income is computed for a business/profession:
- no separate business deductions, depreciation or Chapter VIII‑C deductions can be netted off **against that presumptive amount itself**.
This does not, however, preclude set‑off of losses from other heads subject to general provisions.
7.2 Notional depreciation for WDV purposes
Section 58(6) addresses the **written down value (WDV)** of assets used for presumptive business/profession:
> WDV shall be computed **as if the assessee had claimed and was allowed depreciation** on those assets for each of the relevant tax years.
This prevents assessees from re‑entering the normal scheme with artificially inflated WDV after having paid presumptive tax.
8. Lock‑in and consequences of opting out (business presumptive)
Section 58(7) introduces a lock‑in for **eligible assessee** under Sl. No. 1.
Where:
- an eligible assessee declares profit as per Section 58(2) (Sl. No. 1) for a tax year, and
- declares profit **for any of the next five tax years** in a manner **contrary to Section 58(1)** (i.e. not on presumptive basis),
then such assessee **shall not be eligible** to claim the benefit of Section 58 **for five tax years subsequent** to the tax year in which profit was not so declared.
Further, under Section 58(8), where this sub‑section (7) applies and total income exceeds the basic exemption limit, the assessee **must keep books and obtain audit** as per Sections 62 and 63.
For practice, this means that moving a client off the presumptive business regime is a **multi‑year choice**, not a one‑year adjustment.
9. Cash‑receipt test – deeming of non‑account‑payee instruments
Sub‑section (9) provides that for Sl. Nos. 1 and 3 of the Table:
- receipt of amounts by **cheque or bank draft not being account payee** shall be **deemed to be receipt in cash**.
This impacts:
- eligibility for enhanced turnover limits (₹3 crore / ₹75 lakh), and
- classification of receipts for 6% / 8% split in business presumptive.
Advisory point: clients should be discouraged from non‑account‑payee instruments if they wish to rely on presumptive schemes at higher thresholds.
10. Interaction with Sections 62 and 63 (books & audit)
Section 58 interacts with the new books and audit provisions as follows:
- **Presumptive business/profession** – no books/audit requirement **solely due to Section 58**, unless:
- assessee claims **lower profit** with taxable income (Section 58(3)); or
- falls within lock‑in consequences of Section 58(7)/(8).
- **Goods carriage business (Sl. No. 2)** – specifically carved out via Section 58(10); its gross receipts/income are excluded when testing thresholds under Sections 62 and 63.
Practitioners must re‑map client audit obligations under the new Act, especially where multiple activities (presumptive plus non‑presumptive) co‑exist.
11. Definitions and cross‑references
Section 58(11) defines for the purposes of this section:
- **”eligible assessee”** – resident individual/HUF/firm (non‑LLP) meeting negative conditions (no specified deductions, no specified profession, no commission/brokerage, no agency business).
- **”specified assessee”** – resident individual or firm (non‑LLP) for presumptive profession.
- **”limited liability partnership”** – as per LLP Act, 2008.
- **”goods carriage”, “gross vehicle weight”, “unladen weight”** – as per Motor Vehicles Act, 1988.
- **”heavy goods vehicle”** – goods carriage with gross vehicle weight exceeding 12,000 kg.
- Ownership deeming rule for hire‑purchase / instalment goods carriages.
12. Implementation pointers for professionals
1. **Rebuild 44AD/44ADA/44AE matrices** under Section 58 terminology – map old and new thresholds, client by client.
2. **Re‑examine client cash practices** – ensure non‑account‑payee instruments are phased out where presumptive reliance is expected.
3. **Model lock‑in consequences** – before advising a move off presumptive, run a five‑year projection of turnover, margins and audit costs.
4. **Asset registers** – align WDV working with deemed depreciation under Section 58(6) for clients moving between presumptive and normal regimes.
5. **Documentation of choices** – keep clear file notes on why a client is on presumptive vs regular computation, for each business/profession, given the new statutory tests.
Handled thoughtfully, Section 58 provides continuity with the old presumptive regime while aligning it with the new Act’s emphasis on digital receipts and structured audit thresholds.
Related: New Income Tax Act – overview of structure and transitional issues for professionals (link: /blog/new-income-tax-act-overview-professionals)
Related: New Income Tax Act TDS provisions (Section 393): key points for CAs, CS and tax professionals (link: /blog/new-income-tax-act-tds-provisions-section-393-key-points-professionals)
