Presumptive Taxation Under Section 58: What Changes From Old Sections 44AD, 44ADA & 44ADE

A large share of our clients in Raipur and the surrounding districts never maintain a full set of books. A kirana trader, a road transport operator running four trucks between Raipur and Jayapatna, a freelance interior designer taking on projects across Chhattisgarh and Odisha — none of them are required to. They file under presumptive taxation, declaring income at a fixed percentage of turnover or receipts instead of computing actual profit from books of accounts. That system has just been reorganised under the Income Tax Act, 2025, and since a genuinely large slice of our client base uses it, it's worth being precise about what actually moved and what didn't.

Where Things Stood

Under the 1961 Act, three separate sections covered three separate categories:

• Section 44AD — small businesses (traders, manufacturers, retailers) below a turnover threshold
• Section 44ADA — specified professionals (doctors, lawyers, CAs, architects, consultants, and similar) below a gross receipts threshold
• Section 44AE — owners of goods carriages (trucks and similar vehicles used for transport of goods), computed per vehicle rather than on turnover

Under the Income Tax Act, 2025, these three have been consolidated into a single section — Section 58. Multiple practitioner sources confirm this merger and describe Section 58 as using a serial-number (Sl. No.) table within the section to distinguish the three categories, rather than three standalone sections scattered elsewhere in the Act. I'll be straightforward about the limit of what's verifiable right now: the exact clause-by-clause internal structure of Section 58 — how each sub-category is worded, cross-referenced, and numbered within the section — is not something I can confirm down to the last sub-clause from publicly available commentary at the time of writing. What is consistently reported and reasonably reliable is the headline fact: one section, three categories distinguished by a table, same underlying policy intent carried forward. If your specific filing turns on a sub-clause reference, that's worth confirming against the bare Act text or with us directly rather than relying on secondary summaries, including this one.

Current Thresholds and Deemed Profit Rates

Here's where things stand for Tax Year 2026-27, category by category.

Small Business (old 44AD)

The enhanced ₹3 crore ceiling is conditional on the business keeping its cash dealings under 5% of total receipts — a large number of small traders in Chhattisgarh who still do meaningful cash business need to check this ratio carefully before assuming they qualify for the higher limit.

Professionals (old 44ADA)

This covers the specified professions — legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, and a handful of others listed under the provision — not every kind of freelance or consulting work. A software contractor or a graphic designer, for instance, generally doesn't fall within the specified list and would look at 44AD-equivalent treatment instead, not 44ADA-equivalent, if presumptive taxation applies to them at all.

Goods Carriages (old 44AE)

This one isn't turnover-based at all — it's computed per vehicle, per month of ownership during the year, regardless of how much the vehicle actually earned. The scheme applies to a taxpayer owning up to 10 goods carriages at any time during the year. The per-vehicle deemed income figures have been revised over past years and we'd rather not restate a specific current per-tonne or flat per-vehicle rupee figure here without a source we can point to with full confidence for Tax Year 2026-27 — if you operate goods carriages, the safest path is to have us confirm the exact current per-vehicle figure against your vehicle's registered capacity before you file, since this is one number that genuinely has moved multiple times and a wrong figure directly understates or overstates declared income.

What Presumptive Taxation Actually Buys You

Declaring income at these deemed rates means you're not required to maintain the detailed books of account otherwise mandated under Section 44AA (its successor provision under the new Act), and you're not subject to a tax audit under Section 44AB unless you specifically opt out of presumptive treatment or your actual profit is lower than the deemed rate and your total income exceeds the basic exemption limit — in which case books and audit both come back into play. It's a genuine simplification, not just a filing shortcut: no ledgers, no stock registers, no requirement to substantiate individual expense heads to the department.

A Practical Scenario

Consider a hardware trader in Raipur with annual turnover of ₹1.8 crore, receiving roughly 70% of sales through UPI and bank transfer and the remaining 30% in cash. Because cash receipts exceed 5% of total turnover, the enhanced ₹3 crore ceiling does not apply to this trader — but ₹1.8 crore is still comfortably under the standard ₹2 crore limit, so 44AD-equivalent treatment under Section 58 remains available. Deemed profit gets computed at 8% on the cash-received portion and 6% on the digitally-received portion:

• Digital receipts: 70% × ₹1.8 crore = ₹1.26 crore → deemed profit at 6% = ₹7,56,000
• Cash receipts: 30% × ₹1.8 crore = ₹54,00,000 → deemed profit at 8% = ₹4,32,000
• Total deemed business income: ₹11,88,000

That figure gets declared as business income without a single ledger entry being produced for scrutiny, filed typically through ITR-4. If the trader's actual accounting-based profit happened to be lower than ₹11,88,000, they'd have the option to declare actual profit instead, but doing so drags them into maintaining books and, past certain thresholds, a tax audit — a trade-off worth thinking through rather than assuming the presumptive route is automatically better simply because it's simpler.

Continuity Rule Still Applies

One feature that has consistently applied under the old sections and, as far as current commentary indicates, carries forward under Section 58: once you opt for presumptive taxation and later declare income below the deemed rate (or opt out) in any of the following five years, you lose access to presumptive taxation for the next five years and must maintain full books plus undergo audit if income exceeds the basic exemption limit during that period. This locks in a longer-term decision, not just a single year's filing choice, and it's a point we walk through carefully with every client considering the switch out of presumptive taxation, particularly transport operators evaluating whether to move to full book-keeping as their fleet grows.

Related Advisory Services & Practice Guides

• Tax Audit in Raipur
• ITR Filing in Raipur