Presumptive taxation is an initiative by the Indian government to simplify tax compliance for small businesses and professionals. Under this scheme, eligible taxpayers can declare income at a fixed percentage of their turnover without maintaining detailed accounts or undergoing audits. In 2025, the limits and applicability of this scheme have been expanded, making it even more accessible for micro-enterprises and professionals.
Key Features of Presumptive Taxation in 2025
1. Revised Turnover Limits
- Businesses (Section 44AD): Applicable to businesses with a turnover of up to ₹3 crore, provided cash receipts do not exceed 5% of the total turnover.
- Professionals (Section 44ADA): Applicable to professionals with gross receipts of up to ₹75 lakh, with similar restrictions on cash transactions.
2. Presumptive Income Rates
- Businesses: Income is presumed at 8% of turnover for cash transactions and 6% for digital transactions.
- Professionals: Income is presumed at 50% of gross receipts.
3. Exemption from Maintenance of Books
- Taxpayers opting for presumptive taxation are exempt from maintaining detailed accounts or undergoing audits, reducing compliance burdens.
Benefits of Presumptive Taxation
1. Simplified Compliance
- Small businesses and professionals can file ITR-4 (Sugam) to declare their income without needing detailed records or external audits.
2. Cost and Time Savings
- Reduces the administrative costs of maintaining accounts and hiring accountants for audits.
3. Promotes Digital Transactions
- The lower income rate for digital transactions encourages businesses to adopt cashless payment systems.
Eligibility and Restrictions
- Opting In: Taxpayers must meet the turnover limits and ensure cash receipts do not exceed 5% of total receipts.
- Opting Out: Taxpayers who opt out of presumptive taxation cannot re-enter the scheme for the next five years.
Limitations of the Scheme
- Ineligibility for Deductions: Additional expenses like salaries or rent cannot be deducted under presumptive taxation.
- Not Suitable for Low-Margin Businesses: Businesses with high costs and low margins may find the scheme less beneficial.
Filing Requirements
- Advance Tax Payment: Taxpayers must pay the full amount of advance tax by March 15 each year.
- ITR-4 Filing: Use the simplified ITR-4 form to declare income.
Conclusion
Presumptive taxation in 2025 is a valuable tool for small businesses and professionals to simplify their tax compliance and focus on growth. However, it’s crucial to evaluate individual circumstances to maximize its benefits.
For personalized assistance with presumptive taxation,
contact Verotus Finlegal Solutions LLP at 7066336680 or visit Verotus LLP.
Backlinks:
- Income Tax India - Presumptive Taxation
- Mint: Budget Updates on Presumptive Taxation
- TaxGuru: Presumptive Taxation Simplified
