Presumptive Taxation Scheme

The Presumptive Taxation Scheme (PTS) under the Income Tax Act allows eligible small taxpayers such as small businesses, professionals, and transporters to compute income on a presumptive basis, instead of maintaining detailed books of accounts. Under this scheme, income is presumed to be a fixed percentage of turnover or gross receipts, and tax is paid on that presumed income.

Key Objectives Reduce compliance burden Simplify tax calculations Provide ease of doing business for small taxpayers Applicable Sections Section 44AD – Small businesses Section 44ADA – Professionals Section 44AE – Goods transport vehicles Benefits No requirement to maintain regular books of accounts No need to undergo audit (subject to turnover limits) Income is computed at fixed presumptive rates.

Example:

Suppose a shopkeeper chooses to be taxed under Section 44AD. His total sales for the year amount to ₹30,00,000.
Under this provision, a fixed percentage of the turnover is treated as income—8% for cash receipts (and 6% when the money is received through digital methods).
Since all of his receipts are assumed to be in cash, his taxable income would be:

Taxable Income = 8% × ₹30,00,000 = ₹2,40,000

This amount becomes the basis for tax calculation, and he is not required to maintain detailed books for this purpose.