Changes in presumptive taxation scheme

As the August 31, 2026 deadline approaches for filing Income Tax Returns (ITRs) for Assessment Year 2026-27, many professionals such as doctors, advocates, architects and engineers are contemplating whether to opt for the presumptive taxation scheme under Section 44ADA of the Income Tax Act, 1961. This is in light of the new Income Tax Act, 2025, which came into effect on April 1, 2026.

The presumptive taxation scheme continues to be applicable to resident individuals and partnership firms, excluding Limited Liability Partnerships (LLPs), who are engaged in specified professions like legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology and company secretary professions. The list of eligible professions remains largely unchanged.

However, a significant change introduced by the New Act is the treatment of deductions, losses and tax rebates which may affect the attractiveness of the presumptive taxation scheme. Who exactly can opt for this scheme? Individuals who are residents and engaged in the aforementioned specified professions can avail the scheme, provided they do not earn salary income as such income is taxed under the head 'Salaries' not 'Profits and Gains of Business or Profession'.

The 50% rule and other key features of presumptive taxation, including the gross-receipt thresholds and the method of computing presumptive income, remain largely unchanged. This means that 50% of the gross professional receipts is still deemed to be the income chargeable under the head 'Profits and Gains of Business or Profession'.