A taxpayer engaged in business or profession is required to maintain regular books of account under certain circumstances.1 To give relief to small taxpayers from this tedious work, the Income Tax Act has provided for a presumptive taxation scheme. A person adopting the presumptive taxation scheme can declare income at a prescribed rate and, in turn, is relieved from the tedious job of maintaining account books.
The presumptive taxation scheme can be adopted by following persons :
- Resident Individual
- Resident Hindu Undivided Family
- Resident Partnership Firm (except a Limited Liability Partnership Firm).
Any business which has a total turnover of less than Rs 2 crore can opt for presumptive taxation. Income will be computed on a presumptive basis and the business must declare profits of 8% for non-digital transactions or 6% for digital transactions for the relevant year. In other words, income will not be computed in the normal manner (Turnover minus Expense) but will be computed at 8% or 6% of the turnover. A professional having a gross revenue upto 50 lakhs can opt to be taxed presumptively, and must declare 50% of gross receipts of profession as his presumptive income.
- Section 44AA, Income Tax Act, 1961
- Sections 10A, 10AA, 10B, 10BA, 80HH to 80RRB, Income Tax Act, 1961