Presumptive Taxation Schemes AY 2026-27

By | May 9, 2026
0 Comment

Presumptive Taxation Schemes

Under presumptive taxation schemes, taxpayers can compute their taxable income as a percentage of turnover, gross receipts, or specified amounts without maintaining detailed books of accounts. The schemes are available for both resident and non-resident assessees, covering specific businesses and professions.

Presumptive Schemes for Residents

  • Eligible Assessee:Resident individuals, HUFs, and partnership firms (excluding LLPs).
  • Eligible Business:All except agency or commission businesses.
  • Income Presumption:
    • 8% of turnover (6% if received through banking channels).
  • Opting Out:
    • Mandatory maintenance of books of accounts and audit.
    • Cannot re-opt for 5 years.
  • Section 44ADA: Professions
  • Eligible Assessee:Resident individuals and partnership firms (excluding LLPs).
  • Eligible Professions:Specified professions like legal, medical, engineering, etc.
  • Income Presumption:50% of gross receipts.
  • Opting Out:
    • Mandatory maintenance of books of accounts and audit.
  • Section 44AE: Goods Transport
  • Eligible Assessee:Any resident or non-resident.
  • Eligible Business:Plying, hiring, or leasing goods carriages.
  • Income Presumption:
    • Heavy vehicle: ₹1,000 per ton of gross vehicle weight.
    • Other vehicles: ₹7,500 per month or part thereof.

Presumptive Schemes for Non-Residents

  • Income Presumption:5% of gross receipts.
  • Income Presumption:10% of gross receipts.
  • Audit:Books must be maintained if opted out.
  • Income Presumption:5% of gross receipts.
  • Eligible Assessee:Foreign companies engaged in civil construction for power projects.
  • Income Presumption:10% of gross receipts.
  • Audit:Books must be maintained if opted out.
  • Income Presumption:20% of gross receipts.
  • Income Presumption:25% of gross receipts.

 

Presumptive Taxation Scheme for Businesses Under Section 44AD

 

Section 44AD of the Income-tax Act, 1961, provides a simplified presumptive taxation scheme for eligible businesses. Under this scheme, the taxable income is calculated on a presumptive basis at prescribed rates, eliminating the need for maintaining detailed books of accounts. It applies to eligible resident individuals, HUFs, and partnership firms (excluding LLPs) whose gross receipts or turnover does not exceed specified thresholds.

Key Provisions

  • Eligibility:
  • Applicable to resident individuals, HUFs, and partnership firms (excluding LLPs).
  • Businesses with turnover up to 2 crores, extendable to Rs. 3 crores if cash receipts are ≤5% of total turnover or gross receipts.
    • Exclusions:
  • Non-residents, LLPs, companies, and specified entities like trusts and cooperative societies.
  • Income from agency businesses, commission/brokerage, or professions specified under Section 44AA.
  • Speculative businesses are also excluded as per return filing instructions.
    • Presumptive Income Rates:
  • 8%of turnover for cash receipts.
  • 6%for receipts through digital modes, account payee cheques, or bank drafts.
    • Restriction on Lower Income Declaration:
  • If income is declared lower than the presumptive rate in any of the next 5 years, the taxpayer becomes ineligible for the scheme for the subsequent five years and must maintain books of accounts as per Section 44AA.

Benefits and Limitations

  • Exemption from Maintenance of Books and Audit:
  • Taxpayers under this scheme are exempted from maintaining books of accounts and audit requirements under Sections 44AA and 44AB.
    • No Deduction for Business Expenses:
  • All eligible expenses under Sections 30 to 38 are deemed to have been allowed.
  • No separate deduction for partner remuneration or interest under Section 40(b).
    • Advance Tax Payment:
  • Advance tax is payable in a single installment by March 15, unlike quarterly installments for other taxpayers.

Special Provisions

  • Threshold of Turnover for Cash and Non-Cash Receipts:
  • Turnover limit increases from 2 crores to Rs. 3 crores if cash transactions remain ≤5% of total turnover.
    • Depreciation:
  • Depreciation is deemed to have been allowed, and the written-down value (WDV) of assets is adjusted accordingly.
    • Restrictions on Chapter VI-A Deductions:
  • Deductions under Sections 30 to 38 are allowed, but deductions under Part-C of Chapter VI-A are not applicable.

 

Presumptive Taxation Scheme for Professionals under Section 44ADA

 

Section 44ADA of the Income-tax Act, 1961, provides a simplified presumptive taxation scheme for specified professionals. It allows eligible taxpayers to calculate taxable income on a presumptive basis, reducing compliance requirements. This scheme is applicable if gross receipts from the profession do not exceed Rs. 50 lakhs or Rs. 75 lakhs under specified conditions.

Key Provisions

  • Eligibility:
  • Applicable to resident individuals and partnership firms (excluding LLPs).
  • Gross receipts should not exceed 50 lakhs, extendable to Rs. 75 lakhs if cash receipts are ≤5% of total receipts.
  • Cash receipts include payments through non-account payee cheques or drafts.
    • Eligible Professions:
  • Legal, medical, engineering, architectural, and accountancy.
  • Technical consultancy, interior decoration, information technology, company secretary, authorized representatives, and film artists.
  • Other professions are excluded.
    • Presumptive Income Rate:
  • Presumed income is 50%of gross receipts.

Lower Income Declaration

  • Taxpayers can declare income lower than 50% of gross receipts.
  • However, if total income exceeds the basic exemption limit, they must maintain books of accounts as per Section 44AA and have them audited under Section 44AB.

Benefits and Limitations

  • Simplified Compliance:
  • No requirement to maintain books of accounts or undergo audits if income is calculated on a presumptive basis.
    • No Deduction for Expenses:
  • All allowable expenses under Sections 30 to 38 are deemed allowed.
  • No additional deduction for partner remuneration or interest as per Section 40(b).
  • Depreciation is deemed to have been allowed, and WDV of assets is adjusted accordingly.
    • Advance Tax:
  • Entire advance tax is payable by March 15 of the financial year.

Exemptions and Special Provisions

  • Exemption from disallowance of expenses under Sections 40, 40A , and 43B .
  • Deductions under Chapter VI-A are permissible

 

Presumptive Taxation Scheme for Transporters Under Section 44AE

 

Section 44AE of the Income-tax Act, 1961, provides a presumptive taxation scheme for small transporters engaged in the business of plying, hiring, or leasing goods carriages. The scheme simplifies compliance by allowing taxable income to be calculated on a presumptive basis, provided the taxpayer does not own more than 10 goods vehicles during the financial year.

Key Provisions

  • Eligibility:
  • Applicable to any taxpayer engaged in the goods transportation business.
  • Ownership of goods vehicles should not exceed 10 at any time during the year.
  • Vehicles on hire-purchase or installment payments are considered owned by the taxpayer.
    • Presumptive Income Rates:
  • Heavy Goods Vehicles (gross vehicle weight > 12,000 kg): 1,000 per ton of gross or unladen weight per month or part thereof.
  • Other Goods Vehicles (gross vehicle weight ≤ 12,000 kg): 7,500 per vehicle per month or part thereof.
    • Flexibility to Declare Higher Income:
  • Taxpayers may voluntarily declare income higher than the presumptive rate.

Lower Income Declaration

  • Taxpayers can declare income lower than the presumptive income. However, if total income exceeds the basic exemption limit, they must:

Benefits and Limitations

  • Exemption from Maintenance of Books and Audit:
  • Taxpayers opting for the scheme are exempt from maintaining detailed accounts and audits under Sections 44AA and 44AB.
    • No Deduction for Business Expenses:
  • Deductions under Sections 30 to 38 are deemed to have been allowed.
  • Depreciation is deemed to have been claimed, and the WDV of assets is adjusted accordingly.
    • Advance Tax Compliance:
  • Unlike taxpayers under Sections 44AD or 44ADA, transporters must pay advance tax in four installments.

Additional Requirements

  • Expense Disallowance:
  • No disallowance is made under Sections 40, 40A , or 43B as all expenses are presumed to be allowed.

 

Presumptive Scheme for Shipping Business under Sections 44B and 172

 

Non-residents operating ships may opt for presumptive taxation under Sections 44B or 172. Taxable income is presumed at 7.5% of specified receipts from the carriage of goods, passengers, livestock, or mail.

Presumptive Scheme under Section 44B

  • Applicability: Non-resident individuals or foreign companies engaged in shipping (excluding cruise ships).
  • Presumptive Income:
  • 5% of the total receipts for:
    • Carriage of passengers, livestock or goods at Indian ports.
    • Amounts received in India for shipping activities at foreign ports.
    • Demurrage, handling, or similar charges.
  • Overrides Other Provisions: Income is computed without reference to Sections 28 to 43A, but deductions under Chapter VI-A are available.
  • Double Taxation Avoidance Agreements (DTAAs):
  • If a DTAA assigns taxation rights exclusively to the resident country, no tax is payable in India. A “No Objection Certificate” must be obtained.

Presumptive Scheme under Section 172

  • Applicability: Tax levy and recovery for individual voyages of ships owned or chartered by non-residents, departing from Indian ports.
  • Presumptive Income: 7.5% of amounts paid or payable for carriage of passengers, goods, livestock, or mail at Indian ports.
  • Return Filing by Shipmaster:
  • Must file a return before departure, including all charges received.
  • Authorised persons may file if arrangements are made.
    • Assessment by Tax Authority:
  • Tax is calculated at foreign company rates.
  • Assessment must be completed within nine months of the financial year-end.
    • Port Clearance Certificate:
  • Issued only after verifying tax payment or satisfactory arrangements.
    • Option for Regular Assessment:
  • Owners or charterers may opt for regular assessment before the assessment year’s end.
  • Tax paid under Section 172 is treated as advance tax. Refunds or additional payments are adjusted accordingly.
  • Interest under Sections 234B and 234C or refunds under Section 244A may apply.

 

Presumptive Scheme for Cruise Shipping Business under Section 44BBC

 

Section 44BBC provides a presumptive taxation scheme for non-resident entities operating cruise ships. Under this scheme, 20% of the total receipts from the carriage of passengers is deemed to be taxable income, effective from Assessment Year 2025-26.

Key Features

  • Objective: To promote India as a global cruise tourism hub by offering a predictable tax structure for international operators.
  • Eligible Entities: Non-residents and foreign companies operating cruise ships. Entities with Place of Effective Management (POEM) in India are excluded.
  • Scope:
  • Domestic Traffic: Cruise operations exclusively between Indian ports.
  • International Traffic: Operations between Indian and foreign ports or solely foreign ports fall under Section 44B or Section 172.
    • Effective Date: Applies to income earned on or after April 1, 2024.
    • Nature of Scheme:
  • 20% of the sum received or receivable by the shipping entity from the carriage of passengers.

Computation of Income

  • Taxable Income:
  • 220% of the total amount received or receivable by, or paid or payable to, a non-resident cruise ship operator for carriage of passengers is deemed to be the profits and gains from that business.
    • Override Provisions:
  • Overrides Sections 28 to 43A. Other provisions, including those for capital gains and loss set-off, remain applicable.

Exemptions and Deductions

  • Lease Rentals: Rentals from leasing cruise ships are exempt under Section 10(15B) if both lessor and lessee are subsidiaries of the same holding company.
  • Chapter VI-A Deductions: Permitted alongside presumptive taxation.

 

Presumptive Scheme for Exploration Business under Section 44BB

 

Section 44BB provides a presumptive taxation scheme for non-residents engaged in providing services, facilities, or hiring out plant and machinery for activities related to the exploration, extraction, or production of mineral oils. Taxable income is deemed to be 10% of the gross receipts.

Key Features

  • Objective: Simplify tax compliance for non-resident entities in the mineral oil exploration sector by offering a presumptive tax mechanism.
  • Eligibility:
  • Non-residents providing services or facilities related to mineral oil exploration or production.
  • Non-residents supplying or hiring out plant and machinery for the same purpose.
    • Definitions:
  • Mineral Oil: Includes petroleum and natural gas.
  • Plant: Covers ships, aircraft, vehicles, drilling units, scientific apparatus, and equipment used in the specified activities.
    • Exclusions:
  • Income covered under Section 42 (special provisions for mineral oil businesses).
  • Income classified as royalties or technical fees under Sections 44D, 44DA , or 115A .
  • Other specified circumstances under Section 293A.

Computation of Presumptive Income

  • Taxable Income: 10% of the total receipts, including:
  • Payments for services, facilities, or machinery hire related to mineral oil operations in India or abroad.
  • Amounts received directly or through agents, whether in India or overseas.

Provisions and Implications

  • Option to Declare Lower Income:
  • Permitted, but requires maintaining books of account (Section 44AA) and undergoing a tax audit (Section 44AB).
  • Subject to scrutiny under Section 143(3).
    • Non-adjustability of Certain Losses:
  • Business losses and unabsorbed depreciation from previous years cannot be set off against presumptive income.
  • Losses can be carried forward to future years when the presumptive scheme is not opted for, with the carry-forward period reduced accordingly.
    • Overrides:
  • Overrides Sections 28 to 43A for computing business income.
  • Provisions for capital gains, set-off or carry forward of losses, etc., remain applicable.
    • Deductions:
  • Chapter VI-A deductions are available as the scheme overrides only Sections 28 to 43A.

 

Presumptive Scheme for Airline Companies under Section 44BBA

 

Section 44BBA provides a presumptive taxation scheme for non-residents operating aircraft. Taxable income is deemed to be 5% of specified receipts, simplifying compliance for airline operators.

Key Features

  • Objective: To reduce the compliance burden for non-residents engaged in the airline business by allowing taxation on a presumptive basis.
  • Eligibility:
  • Non-residents engaged in the business of operating aircraft.

Computation of Presumptive Income

  • Taxable Income: 5% of the aggregate of:
  1. Amounts paid or payable for carriage of passengers, goods, mail, or livestock from any location in India (whether paid in India or abroad, directly or through an agent).
  2. Amounts received or deemed to be received in India for carriage from foreign locations.

Provisions and Deductions

  • Income is computed on a presumptive basis, and no further deductions or additions under Sections 28 to 43A are allowed.
    • Chapter VI-A Deductions:
  • Deductions under Chapter VI-A are permissible, as this section overrides only Sections 28 to 43A.

 

Presumptive Scheme for Civil Construction Companies under Section 44BBB

 

Section 44BBB of the Income-tax Act allows foreign companies engaged in civil construction or related activities to compute income on a presumptive basis. This simplifies compliance by requiring tax to be calculated at 10% of amounts received in connection with specified turnkey power projects.

Key Features of the Scheme

  • Eligibility:Available to foreign companies undertaking civil construction, erection, testing, or commissioning related to turnkey power projects approved by the Central Government. Approvals are issued by the Department of Power, Ministry of Energy.
  • Presumptive Income:Taxable income is deemed to be 10% of the sum received or receivable, regardless of whether payments are made in or outside India.

Option to Declare Lower Income

  • Assessees can declare income lower than the presumptive rate, but must maintain books of account under Section 44AA and undergo an audit under Section 44AB. Scrutiny assessment under Section 143(3) is mandatory in such cases.

Treatment of Losses and Depreciation

  • No Set-off:Unabsorbed depreciation and brought forward business losses cannot be set off against presumptive income.
  • Carry Forward:Business losses from earlier years can be carried forward but are reduced by the number of years the presumptive scheme is opted for.

Override of Other Provisions

Deductions under Chapter VI-A

  • Deductions under Chapter VI-A can be claimed even if the presumptive scheme is opted for, as Section 44BBB does not override these provisions.