Section 58: presumptive taxation for certain resident businesses and professions

Introduction

Section 58 is a table-driven presumptive computation. The general-business and specified-profession rows use defined resident taxpayer categories; the goods-carriage row separately describes an assessee who owns not more than ten goods carriages at any time in the tax year. Check each row’s eligibility and computation independently.

Key takeaways

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

Section 58(2) has three categories with separate taxpayer and computation rules. Turnover/receipt ceilings apply to rows 1 and 3; the goods-carriage row uses a vehicle-ownership test.

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

• Section 58(4) bars a loss, allowance or deduction otherwise available under the Act against presumptive income; Section 58(5) gives a specific partner-salary-and-interest deduction for a firm in the goods-carriage category.
• 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" is defined for the specified-profession category as a resident individual or firm other than an LLP. The goods-carriage table separately describes an assessee who owns not more than ten goods carriages.
• 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.

Step-by-step flow for applying Section 58

1. 1

   Which category of the Table in Section 58(2) does the business fit?

   • General business (Sl. No. 1): Assessee must be an eligible assessee; turnover up to ₹2 crore (or ₹3 crore if cash receipts do not exceed 5%).
   • Goods carriage (Sl. No. 2): Assessee owns not more than ten goods carriages at any time in the year.
   • Specified profession (Sl. No. 3): Gross receipts up to ₹50 lakh (or ₹75 lakh if cash receipts do not exceed 5%).
2. 2

   Is the assessee eligible?

   For Sl. No. 1, an eligible assessee is a resident individual, HUF or firm (not an LLP) that has not claimed Chapter VIII-C deductions and does not earn commission or brokerage or carry on agency business or a specified profession. Non-account-payee cheques and drafts count as cash (Section 58(9)).

   • No: Compute income under the normal provisions.
3. 3

   Compute the deemed profit

   Sl. No. 1: 6% of digital receipts plus 8% of other receipts. Sl. No. 2: per-vehicle monthly amounts. Sl. No. 3: 50% of gross receipts. In each case, the higher of this and the profit actually earned.

4. 4

   Do you want to declare a lower profit?

   • Yes, and total income exceeds the basic exemption limit: Maintain books under Section 62 and get a tax audit under Section 63 (Section 58(3)).
   • No: No further deduction for losses, allowances or depreciation is allowed against the deemed income (Section 58(4)).
5. 5

   Opted out after opting in for Sl. No. 1?

   Section 58(7) bars the scheme for the next five tax years.

Practical checklist

Glossary

Presumptive profit

Business or professional income deemed by a statutory turnover, receipts or activity formula.

Eligible assessee

A taxpayer meeting the status and exclusion conditions of the particular Section 58 table row.

Frequently asked questions