Presumptive Income Taxation for Business & Profession

Starting a new business One of the first questions, you’ll face when starting a business is deciding what legal entity to form. Depending on the nature and size of the company, the following legal entities are available:


  • Sole Proprietorship
  • L.L.P. (Limited Liability Partnership)
  • Private Limited Company
  • Public Corporation
  • Joint Venture 

Maintaining Accounts and Books

If your firm meets any of the following criteria, you must keep books of accounts in line with the Income Tax Act. 

Tax Audit

Businesses with gross receipts of more than Rs 1 crore in a fiscal year are subject to tax audits. The tax audit report is due on September 30 of the assessment year. Form 3CD must be used to electronically file the tax audit report.

Due Date 

  • The deadline for filing a tax audit report is September 30 of the assessment year.
  • The due date for filing returns (if a tax audit is required) – September 30 of the assessment year
  • The due date for filing returns (if no tax audit is required) – July 31 of the assessment year

Presumptive Taxation

When we address presumptive incomeSection 44AD of the Income Tax Act is taken under consideration. Any company with a turnover of less than Rs 2 crore can choose to be taxed presumptively.

International Transaction

If you work for clients outside of India, you may receive payments through PayPal or direct credit to your bank account.


T.D.S. not deducted by Foreign Client

There is no reason to be concerned if no T.D.S. has been deducted. When calculating your income, you must include these receipts in your total income and pay the necessary tax because you would be a tax resident of India.

Return of Income

An individual or H.U.F. operating a business must file an income tax return in form I.T.R. 3. A taxpayer who chooses presumptive taxation must file his return in I.T.R. 3.

Computation of Taxable Income

A professional could easily calculate his taxable “Income from Business or Profession” by deducting all of his profession-related expenses from his gross receipts from the profession.

Tax Filing

I.T.R. 3 is the form you need as a professional. Unless you are subject to an audit under the Income-tax Act – you must file your return on or before July 31 of the Assessment Year.

Applicability Of Tax Audit

You must conduct a tax audit if your gross revenue from your profession surpasses Rs 25 lakhs in any fiscal year. If you don’t have your books audited, you could face a fine of up to 0.5 percent of your gross revenue, or Rs 1.5 lakhs, whichever is less.

Presumptive Taxation

A professional with gross revenue of up to Rs 50 lakhs can choose the presumptive tax scheme, in which he can immediately offer 50% of his gross revenue as taxable income and pay taxes on such income at his slab rates. If he chooses this scheme, he will no longer deduct any of his professional expenses. If you need help with calculations, you can use our salary calculation formula to help you do taxes faster.

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