Interplay Provisions for computing profits and gains of business or profession on presumptive basis u/s (44AD, 44ADA and 44AE), Under Income Tax Act, 1961 and Income Tax Act, 2025.
The Income Tax Act, 2025 is a comprehensive overhaul of the 1961 Act, set to take effect from April 1, 2026. While it aims to simplify the tax code, much of the underlying policy for presumptive taxation remains similar, though it has been consolidated and renumbered.
The primary shift is the move from a fragmented system (Sections 44AD, 44ADA, and 44AE) to a unified Section 58 under the new Act.
Comparison Table: Presumptive Taxation
| Feature | Income Tax Act, 1961 | Income Tax Act, 2025 |
| Primary Sections | 44AD, 44ADA, 44AE | Section 58 (Consolidated) |
| Applicability | Scattered across different sections. | Unified in a tabular format within Sec 58. |
| Business Income | Sec 44AD (6% / 8% of turnover) | Section 58(2) Sl. No. 1 |
| Professional Income | Sec 44ADA (50% of receipts) | Section 58(2) Sl. No. 3 |
| Transport Business | Sec 44AE (Fixed per vehicle/month) | Section 58(2) Sl. No. 2 |
| Turnover Limits | ₹2 Cr (₹3 Cr if cash < 5%) | Same (No change in policy thresholds) |
| Nomenclature | Previous Year / Assessment Year | Tax Year (Simplified) |
Key Changes & Continuations
1. Consolidation under Section 58
The 1961 Act had separate sections for different types of presumptive schemes. The 2025 Act merges these into Section 58. It uses a “Sl. No.” (Serial Number) system within the section to distinguish between general business, transport business, and professionals.
2. Change in Terminology
The 2025 Act replaces the confusing “Previous Year” and “Assessment Year” terminology.
Old System: You earn in the “Previous Year” (e.g., FY 2024-25) and pay/file in the “Assessment Year” (AY 2025-26).
New System: There is only the “Tax Year” (e.g., Tax Year 2026-27), which corresponds to the year in which income is earned.
3. Maintenance of Books of Accounts (Section 62)
Under the 1961 Act, the rules for when you must maintain books if you opt out of presumptive taxation were found in Section 44AA . In the 2025 Act, these requirements are primarily found under Section 62.
4. Rates and Eligibility
The actual tax rates for presumptive income remain consistent:
Business: 8% of turnover (reduced to 6% for digital receipts).
Professionals: 50% of gross receipts.
Transport: Specific rates based on the weight of the vehicle (Heavy Goods Vehicle vs. Others).
Summary of Impact
For the average small taxpayer, the “math” doesn’t change, but the “map” does. The 2025 Act reduces the total number of sections from over 800 to 536 by integrating explanations and provisos directly into the main text, making the presumptive rules easier to read without flipping through pages of legal footnotes.
Author Bio
