Section 58: presumptive taxation for certain resident businesses and professions

The three categories covered by the Table in Section 58(2)

Section 58(2) sets out a table with three categories of eligible taxpayers, each with its own turnover/receipts ceiling and its own presumptive computation:

What happens if you declare a lower profit than the deemed figure

Under Section 58(3), if an assessee claims that actual profits are lower than the presumptive figure computed under the Table, and the total income exceeds the basic exemption limit, that assessee must keep and maintain books of account under Section 62 and get the accounts audited and a report furnished under Section 63.

Section 58(7) adds a further consequence for the general-business category (Table Sl. No. 1): if an eligible assessee opts into presumptive taxation for a year, but then declares profit below the presumptive level in any of the next five tax years, they lose the right to use Section 58 for the five tax years following the year in which they departed from it. Section 58(8) then requires such an assessee (once total income exceeds the exemption limit) to maintain books under Section 62 and get them audited under Section 63.

Other computational rules

• No loss, allowance or deduction otherwise available under the Act can be set off against income computed on a presumptive basis (Section 58(4)).
• For a firm in the goods-carriage category (Table Sl. No. 2), partner's salary and interest can still be deducted from the presumptive income, subject to the conditions and limits in Section 35(e) (Section 58(5)).
• The written down value of any asset used in the specified business is computed as if depreciation had actually been claimed and allowed for every relevant tax year, even though no separate deduction was taken (Section 58(6)).
• A cheque or bank draft that is not "account payee" is treated as a cash receipt for testing the 5% cash-receipts thresholds (Section 58(9)).
• The monetary limits for maintaining books (Section 62) and tax audit (Section 63) exclude the gross receipts/income of the goods-carriage business under Table Sl. No. 2 (Section 58(10)).

Who counts as an "eligible assessee" and "specified assessee"

Section 58(11) defines the categories of taxpayers who can use this section:

• "Eligible assessee" (for the general-business category): an individual, HUF, or firm other than an LLP, resident in India, who has not claimed any deduction under Chapter VIII-C for the year, does not carry on the specified profession defined in Section 62(4), does not earn commission or brokerage income, and does not carry on any agency business.
• "Specified assessee" (for the goods-carriage and specified-profession categories): an individual or a firm, other than an LLP, resident in India.
• A "heavy goods vehicle" is a goods carriage with gross vehicle weight exceeding 12,000 kilograms.
• A person still paying off a goods carriage under hire-purchase or instalments is deemed to be its owner for this section.

Frequently asked questions