Small and medium enterprises contribute a major portion to the GDP and to the growth of the economy. As a matter of convenience for them, Income-tax Act extends certain benefits to them and provides relaxation from compliance with certain provisions, inter-alia, an option to compute income on presumptive basis, exemption from mandatory audit of books of account, exemption from TDS and so forth. This document gives a brief introduction to those provisions which provide certain benefits to small businessmen.
Article contain all benefit available to Small Businessmen for AY 2025-26 including provisions for Presumptive Taxation Scheme, Various deductions available from business profits, Maintenance of books of accounts and audit thereof, Exemptions and Deductions, Tax Deducted at Source and Advance Tax, Basic exemption limits, Concessional tax rate for domestic company and Exemption from e-filing of return of income.
List of Income Tax benefits available to Small Businessmen for AY 2025-26*
| S. N. | Particulars | Section | Benefits /Deductions allowed |
| A. | Presumptive Taxation Scheme | ||
| 1. | Computation of income from eligible business on presumptive basis under Section 44AD (Subject to certain conditions). | 44AD | • Presumptive income of eligible business shall be 8 % of gross receipt or total turnover (if turnover or gross receipts of eligible business does not exceed Rs. 2 crore).
• Presumptive income shall be calculated at rate of 6% in respect of total turnover or gross receipts which is received by an account payee cheque or draft or use of electronic clearing system or through such other electronic mode as may be prescribed. Note: If the amount of cash received during the previous year does not exceed 5% of the total turnover or gross receipt of such year then the threshold limit for total turnover shall be taken as Rs. 3 crore instead of Rs. 2 crore. The receipts through the mode of cheque or a bank draft which is not an account payee, shall be considered a receipt in cash for this purpose. |
| 2. | Computation of income from profession on presumptive basis under Section 44ADA (Subject to certain conditions). | 44ADA | Presumptive income of profession shall be 50% of gross receipt (if gross receipt of assessee does not exceed Rs. 50 lakh).
Note: if the amount of cash received during the previous year does not exceed 5% of the total gross receipt of such year then the threshold limit for total gross receipt shall be taken as Rs. 75,00,000 instead of Rs. 50,00,000. The receipts through the mode of cheque or a bank draft which is not an account payee, shall be considered a receipt in cash for this purpose. |
| 3. | Presumptive income from business of plying, hiring or leasing of goods carriage if assessee does not own more than 10 goods carriage. | 44AE | For Heavy Goods Vehicle:
Rs. 1,000 per ton of gross vehicle weight for every month or part of a month during which the heavy goods vehicle is owned by assessee For Other Goods Vehicle: Rs. 7,500 for every month or part of a month during which the goods carriage is owned by assessee Note: ‘Heavy goods vehicle’ means goods carriage vehicle the gross vehicle weight of which exceeds 12,000 kilograms. |
| B. | Deductions from business profits | ||
| 1. | Rent, rates, taxes, repairs (excluding capital expenditure) and insurance for premises | 30 | Actual expenditure incurred excluding capital expenditure |
| 2. | Repairs (excluding capital expenditure) and insurance of machinery, plant and furniture | 31 | Actual expenditure incurred excluding capital expenditure |
| 3. | Depreciation shall be allowed in respect of following assets:
i. Tangible Assets (buildings, machinery, plant or furniture); ii. Intangible Assets (know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature not being goodwill of business or profession). |
32(1)(i) | Depreciation shall be allowed, to taxpayers engaged in business of generation or generation and distribution of power, at prescribed percentage on actual cost of an asset
However, if asset is acquired and put to use for less than 180 days during the previous year, the deduction shall be restricted to 50% of depreciation computed above. Note: Taxpayers engaged in the business of generation or generation and distribution of power shall have the option to claim depreciation either on basis of straight line basis method or written down value method on each block of asset. |
| 4. | Depreciation shall be allowed in respect of following assets:
i. Tangible Assets (buildings, machinery, plant or furniture); ii. Intangible Assets (know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature not being goodwill of business or profession). |
32(1)(ii) | Depreciation shall be allowed to all taxpayer (except as referred to above) at prescribed percentage on written down value of each block of asset (as per WDV method).
However, if asset is acquired and put to use for less than 180 days during the previous year, the deduction shall be restricted to 50% of depreciation computed above. |
| 5. | Additional depreciation shall be allowed to the following assessees in respect of new plant and machinery [other than ships, aircraft, office appliances, second hand plant or machinery, etc.]:
a) manufacture or production of any article or thing; or b) generation, transmission or distribution of power (if taxpayer is not claiming depreciation on basis of straight line method) |
32(1)(iia) | Additional depreciation to be allowed at 20 % of actual cost of new plant and machinery.
However, if an asset is acquired and put to use for less than 180 days during the previous year, 50% of additional depreciation shall be allowed in year of acquisition and balance 50% would be allowed in the next year. |
| 6. | Additional depreciation shall be allowed on new plant and machinery (other than ships, aircraft, vehicle, office appliances, second hand plant or machinery, etc.) shall be allowed subject to certain conditions.
Such additional depreciation to be allowed to all taxpayers which set up an undertaking or enterprise for production or manufacture of any article or thing in any notified backward area in the state of Andhra Pradesh, Bihar, Telangana or West Bengal. Note: 1. Manufacturing unit should be set-up on or after April 1, 2015. 2. New plant and machinery should be acquired and installed on or after April 1, 2015 but before April 1, 2020. |
Proviso to Section 32(1)(iia) | Additional depreciation to be allowed at 35 % of actual cost of new plant and machinery.
However, if an asset is acquired and put to use for less than one 180 days during the previous year, 50% of additional depreciation shall be allowed in year of acquisition and balance 50% in next year. |
| 7. | Investment allowance shall be allowed to a company engaged in business or manufacturing or production of any article or thing (Subject to certain conditions). | 32AC | Investment allowance shall be allowed at 15% of actual cost of new asset acquired and installed. |
| 8. | Investment allowance shall be allowed to all taxpayers who acquire new plant and machinery for purpose of setting-up manufacturing unit in notified backward areas in the State of Andhra Pradesh, Bihar, Telangana or West Bengal.
Note: 1. New asset should be acquired and installed on or after April 1, 2015 but before April 1, 2020. 2. Manufacturing unit should be set-up on or after April 1, 2015. 3. Deduction shall be allowed under Section 32AD in addition to deduction under Section 32AC if assessee fulfils the specified conditions. |
32AD | Investment allowance shall be allowed at 15% of actual cost of investment made in new plant and machinery (other than ships, aircraft, vehicle, office appliances, second hand plant or machinery, etc.) |
| 9. | Insurance premium covering risk of damage or destruction of stocks/stores | 36(1)(i) | Actual expenditure incurred |
| 10. | Insurance premium covering life of cattle owned by a member of co-operative society engaged in supplying milk to federal milk co-operative society | 36(1)(ia) | Actual expenditure incurred |
| 11. | Medical insurance premium paid by any mode other than cash, to insure employee’s health under (a) scheme framed by GIC of India and approved by Central Government; or (b) scheme framed by any other insurer and approved by IRDA | 36(1)(ib) | Actual expenditure incurred |
| 12. | Bonus or commission paid to employees which would not have been payable as profit or dividend if it had not been paid as bonus or commission | 36(1)(ii) | Actual expenditure incurred |
| 13. | Interest paid in respect of capital borrowed for the purposes of the business or profession. | 36(1)(iii) | Actual amount of interest incurred.
Note: If sum is borrowed for acquiring a capital asset, interest thereon pertaining to the period before asset is first put to use shall not be allowed as deduction. |
| 14. | Employer’s contributions to recognized provident fund and approved superannuation fund [subject to certain limits and conditions] | 36(1)(iv) | Actual expenditure incurred |
| 15. | Any sum paid by assessee-employer by way of contribution towards a pension scheme, as referred to in section 80CCD, on account of an employee to the extent it does not exceed 10 per cent of the employee’s salary in the previous year. | 36(1)(iva) | Actual expenditure incurred subject to the limit of 10 per cent of the employee’s salary*
*Salary = Basic Pay + Dearness Allowance (to the extent it forms part of retirement benefits)+ turnover based commission |
| 16. | Contributions to approved gratuity fund (Subject to certain limits and conditions) | 36(1)(v) | Actual expenditure incurred |
| 17. | Employer’s contribution to wards approved gratuity fund created exclusively for the benefit of employees under an irrevocable trust shall be allowed as deduction (subject to certain conditions) | 36(1)(va) | Actual expenditure incurred not exceeding 8.33% of salary of each employee |
| 18. | Allowance in respect of animals which have died or become permanently useless (Subject to certain conditions) | 36(1)(vi) | Actual cost of acquisition of such animals less realization on sale of carcasses of animals |
| 19. | Bad debts which have been written off as irrecoverable in books of accounts. (Subject to certain conditions)
Note: W.e.f. assessment year 2016-17, bad-debts shall be allowed as deduction even if they are not written-off from books of accounts. Such deduction shall be allowed if amount of debt or part thereof has been taken into account in computing income on the basis of Income Computation and Disclosure Standards notified under section 145(2) without recording the same in the accounts. |
36(1)(vii) | Actual bad debts which have been written off from books of accounts |
| 20. | Securities Transaction Tax paid | 36(1)(xv) | Actual expenditure incurred if corresponding income is included as income under the head profits and gains of business or profession |
| 21. | Amount equal to commodities transaction tax paid by an assessee in respect of taxable commodities transactions entered into in the course of his business during the previous year is allowed as deduction | 36(1)(xvi) | Actual expenditure incurred if corresponding income is included as income under the head profits and gains of business or profession |
| 22. | Amount of expenditure incurred by a co-operative society (engaged in business of manufacture of sugar) for purchase of sugarcane. | 36(1)(xvii) | Deduction would be allowed the extent of lower of following:
a) Actual purchase price of sugarcane, or b) Price of sugarcane fixed or approved by the Government |
| 23. | Marked to market loss or other expected loss as computed in accordance with the ICDS notified under section 145(2) | 36(1)(xviii) | Marked to Market loss or Expected Loss |
| 24. | Any other expenditure [not being personal or capital expenditure and expenditure mentioned in sections 30 to 36] laid out wholly and exclusively for purposes of business or profession | 37(1) | Actual expenditure incurred |
| 25. | Interest, salary, bonus, commission or remuneration paid to partners (subject to certain conditions and limits) | 40(b) | a) Interest, in accordance with terms of partnership deed but not exceeding simple interest at 12 per annum
b) Remuneration to working partners: ■ If book profit is negative: Rs. 1,50,000 ■ If book profit is positive: (i) Rs. 1,50,000 or 90% of book profit, whichever is more, on first Rs. 3 lakhs of book profit (ii) 60% of balance book profit |
| C. | Maintenance of books of accounts and audit thereof | ||
| 1. | Compulsory maintenance of prescribed books of account – Specified Profession (Subject to certain conditions and circumstances) | 44AA | Persons carrying on specified profession |
| 2. | Compulsory maintenance of books of account – Other business or profession (Subject to certain conditions and circumstances) | 44AA | 1) If the total sales, turnover or gross receipts exceeds Rs 10,00,000 in any one of the three years immediately preceding the previous year; or
2) If the income from business or profession exceeds Rs 1,20,000 in any one of the three years immediately preceding the previous year. Note: Individuals or HUFs shall be required to maintain books of account only when either their gross turnover/gross receipts exceed Rs 2,50,0000 or their income from business or profession exceed Rs 2,50,000. |
| 3. | Compulsory Audit of books of accounts (Subject to certain conditions and circumstances) | 44AB | 1) If total sales, turnover or gross receipts exceeds Rs. 1 Crore in any previous year, in case of business; or
2) If gross receipts exceeds Rs. 50 Lakhs in any previous year, in case of profession. Note: a) This section is not applicable to the person, who opts for presumptive taxation Scheme under Section 44AD/44ADA. b) Threshold limit of Rs. 1 crore shall be increased to Rs. 10 crore in case where the cash receipt and payment made during the year does not exceed 5% of total receipt or payment the business |
| D. | Exemptions and Deductions | ||
| 1. | Amount received by individual member from HUF. [Subject to the provisions of Section 64(2)] | 10(2) | Entire amount is exempt from tax |
| 2. | Share of profit received by partners from a partnership firm. | 10(2A) | Entire amount is exempt from tax |
| 3. | Any sum of money or immovable property or movable property received on or after April 1, 2017 without consideration or for inadequate consideration*** from a relative or member of HUF (subject to certain conditions and circumstances).
Note: Any sum of money or immovable property or movable property received on or after April 1, 2017 without consideration or for inadequate consideration*** from a relative or member of HUF (subject to certain conditions and circumstances). Note: 1. In case of immovable property, ‘inadequate consideration’ shall mean difference between stamp duty value and actual consideration, if it exceeds Rs. 50,000 or amount equal to 10% of consideration, whichever is higher. 2. Any sum of money received by an individual, from any person, in respect of any expenditure actually incurred by him on his medical treatment or treatment of any member of his family in respect of any illness related to COVID-19, shall not be considered as income of such person. (subject to certain conditions) 3. Any sum of money received by family member of a person who died due to COVID-19, the money so received shall not be considered as income of the family member where such money is received from the employer of deceased person. Where the money is received from any other person or persons, the exemption amount shall be limited to Rs. 10 lakh in aggregate. (subject to certain conditions) |
56(2)(x) | The whole amount received from specified relatives or in specified circumstances shall not be included in taxable income. |
| 4. | Rent paid for furnished /unfurnished residential accommodation (Subject to certain conditions) | 80GG | Least of the following shall be exempt from tax:
a) Rent paid in excess of 10% of total income*; b) 25% of the Total Income; or c) Rs. 5,000 per month. Total Income = Gross total income minus long term capital gains, short term capital gains under section 111A, deductions under sections 80C to 80U (other than 80GG) and income under section 115A |
| 5. | Deduction in respect of employment of new employees. | 80JJAA | Deduction shall be allowed at 30% of additional employee cost paid for first three Assessment years.
Note: “Additional employee cost” means total emoluments paid or payable to additional employees employed during the previous year. Provided that in case of existing business, the additional employee cost shall be nil if – (a) There is no increase in the number of employees from the total number of employees employed as on the last day of the preceding year ; (b) Emoluments are paid otherwise than by an account payee cheque or account payee bank draft or by use of electronic clearing system through bank account or through such electronic mode as may be prescribed. (Subject to other conditions) |
| 6. | Deduction in respect of eligible start-up (subject to certain conditions)
Note: 1. Eligible start-up means a company or a limited liability partnership, incorporated on or after 1/4/2016 but before 1/4/2025, whose total turnover doesn’t exceed Rs. 100 crores in the previous year in which deduction is claimed by that start-up and it holds a certificate from Inter-Ministerial Board of Certification. 2. The deduction is available for any 3 consecutive assessment years out of 10 years beginning from the year in which the eligible start-up is incorporated. |
80- IAC | Deduction of 100% of the profit and gains derived by an eligible start-up from a business involving innovation, development, deployment or commercialization of new products, process or services driven by technology or intellectual property rights. |
| 7. | Deductions in respect of profits and gains arising from housing projects | 80-IBA | Deduction of 100% of the profits and gains derived by assessee from the business of developing and building affordable housing projects. |
| E. | Tax Deducted at Source and Advance Tax | ||
| 1. | Lower rate of TDS under Section 194C in case of payments to a contractor or sub-contractor (Subject to certain conditions)
Tax is required to be deducted only if sum paid exceeds Rs. 30,000 or aggregate of sum paid during the financial year exceeds 75,000 (Rs. 100,000 from 01.06.2016). |
194C | Deduction of tax at source at 1% if recipient is an Individual or HUF |
| 2. | No TDS from sum paid or payable to contractor who is in the business of plying, hiring or leasing goods carriage and owns ten or less goods carriages at any time during the previous year | 194C | No TDS if such contractor owns ten or less goods carriages and furnishes a dedication to that effect after alongwith PAN |
| 3. | No TDS from interest paid on debentures issued by a company in which public are substantially interested. Provided interest is paid by account payee cheque to an individual and HUF. | 193 | No TDS if interest during the financial year does not exceed Rs. 5,000 |
| 3A. | No TDS from dividend paid by any mode other than cash to resident persons. | 194 | No TDS if amount paid or payable during the financial year does not exceed Rs. 5,000. |
| 4. | No obligation to deduct tax at source under Section 194A, 194C, 194H, 194-I and 194J if an Individual or HUF carries on a business or profession and total sales, turnover or gross receipts from such business or profession does not exceed the monetary limit specified under Section 44AB during the financial year immediately preceding the financial year in which sum is to be credited or paid. | – | Not liable to deduct tax at source |
| 4A. | No TDS from payment to participants of e-commerce | 194-O | No TDS if amount paid or payable during the financial year does not exceed Rs. 5 Lakhs |
| 4B. | No obligation to deduct tax by an Individual* or HUF* responsible for paying any sum to any resident for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract, by way of commission (not being insurance commission referred to in section 194D) or brokerage or by way of fees for professional services.
* Other than those who are required to deduct income-tax as per the provisions of section 194C, section 194H, or section 194J |
194M | No tax shall be deducted from specified payments if the aggregate of sum paid or credited during the year doesn’t exceed Rs. 50 lakhs |
| 4C. | No obligation to file return of income by a senior citizen (whose age is 75 years or more) if:
a) His total income consists only income in the nature of pension and interest received or receivable from any account maintained with deductor (such bank); and a) Tax on such income is deducted by deductor on the basis of rates in force. |
194P | No obligation to file return of income |
| 4D. | No TDS if amount paid or payable to resident seller for purchase of goods during the Financial Year if aggregate value of goods doesn’t exceed Rs. 50 lakhs | 194Q | No TDS from payment made to resident seller |
| 4E. | No TDS if aggregate value of benefit/perquisite provided during the Financial Year doesn’t exceed Rs. 20,000 | 194R | No TDS in case any benefit or perquisite is provided to a resident |
| 4F. | No tax shall be deducted under this provision in the following circumstance:
• If the consideration is payable by any person (other than a specified person) and its aggregate value does not exceed Rs. 10,000 during the financial year. • If the consideration is payable by a specified person and its aggregate value does not exceed Rs. 50,000 during the financial year Specified person means: (a) An individual or a HUF, whose total sales, gross receipts or turnover does not exceed Rs. 1 crore in case of business or Rs. 50 lakhs in case of a profession, during the financial year immediately preceding the financial year in which virtual digital asset is transferred; (b) An individual or a HUF who does not have any income under the head profits and gains of business or profession |
194S | No TDS from payment on transfer of Virtual Digital Asset |
| 5. | No deduction of tax shall be made under Sections 194 and 194EE, if resident individual furnishes to the payer a written declaration in prescribed form that tax on his estimated total income of the previous year will be nil. | 197A(1) | No tax shall be deducted from specified payments if the sum paid does not exceed the maximum amount which is not chargeable to tax |
| 6. | No deduction of tax shall be made under sections 192A, 193, 194, 194A, 194D, 194DA, 194EE, 194-I and 194K if resident senior citizen furnishes to the payer a written declaration in prescribed form that tax on his estimated total income of the previous year will be nil. | 197A(1C) | No tax shall be deducted from specified payments |
| 7. | Exemption from payment of advance tax by a resident senior citizen or resident super senior citizen not having any income from business or profession
(who is at least 60 Years of age at any time during the previous year) |
207(2) | Not liable to pay advance tax |
| 8. | No need to pay advance tax in installments by assessee who has opted for presumptive taxation scheme under Section 44AD or 44ADA | 44AD/44ADA | Whole amount of advance tax can be paid in one installment on or before 15th March of the financial year |
| 9. | Liability for payment of advance tax | 208 | Taxpayer is liable to advance tax only if his advance tax liability is Rs. 10,000 or more |
| F. | Basic exemption limits | ||
| 1. | Maximum amount of income which is not chargeable to Income-tax | Rs. 2,50,000 | Individual/HUF taxpayer |
| 1A. | Maximum amount of income which is not chargeable to Income-tax in case of person who opted for new tax regime under section 115BAC | Rs. 3,00,000 | Individual, HUF/ AOP/ BOI/ Artificial Juridical Person |
| 2. | Maximum amount of income which is not chargeable to Income-tax in the hands of a resident senior citizen
(who is at least 60 Years of age at any time during the previous year but less than 80 Years of age on the last day of the previous year) |
Rs. 3,00,000 | Resident Senior Citizen |
| 3. | Maximum amount of income which is not chargeable to Income-tax in the hands of a resident super senior citizen
(who is at least 80 Years of age at any time during the previous year) |
Rs. 5,00,000 | Resident Super Senior Citizen |
| 4. | Rebate to resident individual whose total income does not exceed Rs. 5,00,000 [Section 87A] | Tax payable subject to maximum of rebate Rs. 12,500 | Resident Individual |
| 4A. | Rebate to resident individual whose total income chargeable to tax under section 115BAC(1A) does not exceed Rs. 7,00,000 [Section 87A] | Tax payable subject to maximum of rebate Rs. 25,000 | Resident Individual |
| 5. | HUF is assessed to tax as a separate entity | HUF is treated as a person distinct from Individual members or Karta. | HUF |
| 6. | Concessional tax regime under section 115BAC | Option for payment of taxes at reduced rates (subject to certain conditions) | Individual, HUF/AOP/ BOI/Artificial Juridical Person |
| G. | Concessional tax rate for domestic company and co-operative society | ||
| 1. | Concessional rate of tax for domestic company if –
(i) Such company has been set-up and registered on or after March 1, 2016; and (ii) It is engaged in business of manufacturing or production of any article or thing (Subject to certain other conditions) |
115BA | Income shall, at the option of such company, be computed at concessional tax rate of 25%. |
| 2. | Concessional rate of tax for domestic company, if total turnover or gross receipt in the previous year 2022-23 does not exceed Rs. 400 Crores. | First Schedule of Finance Act, 2022 | Rate of income tax shall be 25% of total income. |
| 3. | Concessional rate of tax for domestic company if total income of the company is computed without providing for specified deductions or exemptions | 115BAA | Rate of income tax shall be 22% of total income. |
| 4. | Concessional rate of tax for domestic manufacturing company if:
a) Such Co. incorporated on or after 01-10-2019; b) It should commence the manufacturing or production of an article or thing on or after 01-10-2019 but before 31-03-2024; c) It must be engaged in the business of manufacture or production of any article or thing and research in relation to, or distribution of, such article or thing manufactured or produced by it; or generation of electricity; d) The total income of the company is computed without providing for specified deductions or exemptions (Subject to certain other conditions) |
115BAB | Rate of income tax shall be 15% of total income. |
| 5. | Concessional rate of tax for resident co-operative society if total income of the company is computed without providing for specified deductions or exemptions | 115BAD | Rate of income tax shall be 22% of total income. |
| 6. | Concessional rate of tax for resident co-operative societies engaged in the manufacturing or production of an article or thing if total income of the company is computed without providing for specified deductions or exemptions | 115BAE | Rate of income tax shall be 15% of total income. |
Exemption from e-filing of return of income
Form Assessment year 2019-20, every taxpayer has to file Income-tax return electronically except a super senior citizen (i.e., an Individual whose age is 80 years or above at any time during the previous year 2018-19) who furnish the return in ITR-1 or ITR-4
[As amended by Finance Act, 2024]
(Republished with Amendment, Source -Income Tax Website)
Yes, i must say by going through the whole Article that no doubt its very informative and cover up the things in small rapper pack…
nicely prepared and drafted…
Excellent Article. Wishing God’s blessings
Excellent, Comprehensive & useful article. It helps us to understand/ brush up the various provisions spread through different Chapters of the Income Tax Act. Thanks & wishing God’s gracre
Excellent, Comprehensive & useful article,helping the readers to understand/ brush up the various provisions of the Income tax Act, spread through different Sections/ chapters . Thanks for bringing them under one roof and helping us to get them in a ready-to- refer Capsule form. Wishing God’s grace CA V.Gopalswamy, Chennai 12 06 2018
Superb article
Thanks a lot
Very Nice article…Neatly drafted
Thank you very much for explaining exact status of presumptive income
thank you for spending your valuable time in providing such a useful article
Thank you very much…we are expecting more of such articles for every type of business entity henceforth.