Section 58 Special provision for computing profits and gains of business or profession on presumptive basis in case of certain residents.

Income-tax Act, 2025

At a Glance

These documents present two texts: Section 58 of the Income-tax Act, 2025 (final/statutory version) and Clause 58 of the Income Tax Bill, 2025 (old version). Both establish presumptive taxation rules for certain resident taxpayers carrying on small businesses, goods-carriage operations and certain professions. The differences between the Bill (old) and the final Section are limited but material for compliance and computation. Affected parties include eligible individuals, HUFs and firms (excluding LLPs), small transport operators and specified professionals. Effective date or enactment date: Not stated in the document.

Background & Scope

Statutory hooks: references to sections 26 to 54 (computation rules generally), section 62 and section 63 (books, accounts and audit) and cross-references to Chapter VIII-C and Limited Liability Partnership Act, 2008. Both texts set out a Table specifying (A) type of business/profession; (B) eligible assessee; (C) turnover/gross receipts limits; and (D) manner of computation (presumptive percentages or specified rates). The texts provide definitional material on "eligible assessee", "specified assessee", "limited liability partnership", and vehicle terminology drawn from the Motor Vehicles Act, 1988. Any other definitions or explanations: Not stated in the document.

Statutory Provision Mode

Text & Scope

Both instruments create a special presumptive computation regime and exclude sections 26-54 to the extent contrary. They apply to three categories in the Table: (1) Any business other than goods carriage; (2) Business of plying, hiring or leasing goods carriage; and (3) Specified profession/Any profession as referred in section 62 provisions. The regime deems prescribed percentages or specified amounts to be the profits chargeable to tax unless the taxpayer opts to claim actual profits (and then certain conditions apply).

Interpretation

Legislative intent as indicated by text: to provide a simpler presumptive basis for computing profits of small taxpayers (business, transport and certain professions), to limit applicability by setting turnover/gross receipts thresholds and to curtail allowance of separate deductions or losses against the presumptive income. The text signals an intent to differentiate receipts realised by banking/online mode from other modes for business (serial no.1) in the final Section. Any further legislative intent or policy background: Not stated in the document.

Exceptions/Provisos

Key carve-outs and conditions set out in the text:

• Where taxpayer claims lower actual profit than presumptive amount and total income exceeds basic exemption limit, books must be maintained and accounts audited (sections 62 & 63) - both texts contain this obligation, though cross-references differ slightly in bracketed subsections in the Bill.
• No loss, allowance or deduction under the Act is permitted against income computed under the presumptive clause (final Section sub-sec (4); Bill sub-sec (4) uses reference to sub-sec (1) - see differences below).
• Serial no.2 (goods carriage): in the final Section salary and interest to partners in a firm shall be deductible subject to section 35(e); the Bill uses section 35(f) - difference in cross-reference noted below.
• Written down value for depreciation computed as if depreciation had been claimed and allowed (both texts contain this rule).
• Anti-avoidance through denial of benefit for five years if eligible assessee declares profit contrary to subsection (1) for any of five succeeding years (both texts contain a similar restriction).
• Receipt by non-account-payee cheque/bank draft treated as cash for purposes of cash-limit tests (both texts contain this rule).

Illustrations

• Example 1 (business other than goods carriage): An eligible assessee with turnover of Rs. 1.8 crore received 90% by specified banking/online mode and 10% otherwise - under the final Section the presumptive income will be the higher of (A) aggregate of (i) 6% of total turnover or gross receipts which is received by specified banking or online mode during the tax year or before the due date specified in section 263(1) in respect of that tax year; (ii) 8% of total turnover or gross receipts as reduced by turnover covered in (i); or (B) actual profit claimed. Concrete numeric computation: Not stated in the document.

• Example 2 (goods carriage): Owner of one heavy goods vehicle owned for 6 months: presumptive income component would be Rs.1,000 per ton of gross vehicle weight (or unladen weight as applicable) multiplied by months owned - exact tonnage and resulting sum: Not stated in the document.

Interplay

Both texts reference sections 62 and 63 (books and audit). The final Section expressly excludes applicability of sections 62 and 63 insofar as they relate to the goods-carriage business for monetary limit computations (sub-sec (10)). The Bill has similar references but bracketed cross-references differ (section 62(2) in Bill). Interaction with Chapter VIII-C and section 144 is controlled through conditions defining "eligible assessee" - the final Section uses section 144 and Bill uses section 141 - see differences below. Any further interactions with Rules/Notifications/Circulars: Not stated in the document.

Differences Between the Two Texts and Practical Impact

Practical Implications

• Taxpayers must verify which professions/businesses fall within "specified" definitions by reference to the enacted section 62 numbering, as the Bill and final Section cite different sub-sections.
• Receipts realised by specified banking/online mode have a timing qualifier in the final Section (receipt during tax year or before due date u/s 263(1)), which can affect whether a receipt counts towards the preferential 6% computation - practitioners should ensure receipts are processed in that timeframe to secure the favourable computation.
• Firm owners in goods-carriage business must check whether partner salary/interest deduction is governed by section 35(e) (final) or 35(f) (Bill) and apply the relevant limits accordingly; this may change taxable income for such firms.
• The final Section's express exclusion of sections 62 and 63 for the goods-carriage business in computing monetary limits reduces the risk of triggering audit/book-keeping thresholds by aggregating such receipts - but requires careful reading to apply exclusions correctly.
• Record-keeping: where an assessee claims actual profits lower than presumptive income and total income exceeds basic exemption, books and audit obligations apply - taxpayers should retain books and be prepared for audit if invoking that route.
• Receipt by non-account-payee cheque or bank draft is treated as cash for the cash-receipt tests - practitioners should track payment modes and classify non-account-payee instruments accordingly.

Key Takeaways

• Both texts establish a presumptive taxation regime for small businesses, goods-carriage owners and certain professionals with turnover thresholds and prescribed computation methods.
• Differences between the Bill and the final Section are mainly in cross-references (section numbers), phrasing of the banking/online receipts rule and the deduction cross-reference for partner remuneration in firms operating goods carriages.
• Final Section clarifies timing for banking/online receipts and expressly excludes sections 62/63 for goods-carriage businesses when computing monetary limits, reducing ambiguity for transport operators.
• Taxpayers seeking to claim actual lower profits must maintain books and obtain audit reports where total income exceeds exemption limit - a compliance cost and evidentiary requirement.
• Where the Act omits or alters cross-references present in the Bill, practitioners must consult the enacted sections (62, 63, 35, 141/144 etc.) to determine precise eligibility and deductions.

Full Text:

Section 58 Special provision for computing profits and gains of business or profession on presumptive basis in case of certain residents.