Section 44AD is now Section 58: what changed for traders, retailers and small business from FY 2026-27

If you run a shop, a trading business, manufacturing or any small enterprise and use the presumptive scheme, there is a new section number to remember from FY 2026-27.

44AD is now Section 58.

And this is not merely a renaming. 44AD, 44ADA and 44AE have all been brought into a single Section 58, with a tabular structure. The limits are unchanged, but the drafting has moved — and an old trap is still sitting exactly where it was.

# First, get the timing clear

So the return going in today is still under the old 44AD. Section 58 applies to this year's business, whose return you will file in July 2027 — but advance tax and books should already be running on it.

# The limits are unchanged

• Turnover up to ₹2 crore — scheme available
• Up to ₹3 crore — if the cash condition is satisfied

The condition: aggregate cash receipts for the year must not exceed 5% of total turnover or gross receipts.

# And this is where the trap sits

Consider what that means. You assume: "we take all payments through the bank, our cash receipts are nil, so we qualify for the ₹3 crore limit." But if you accepted some bearer cheques during the year — very common in small business — those count as cash in this test.

A single ₹15 lakh bearer cheque on ₹2.5 crore of turnover puts you at 0.6%. That is fine. But if there are several such cheques and you cross 5%, your limit quietly becomes ₹2 crore — and at ₹2.5 crore of turnover you have fallen out of the scheme entirely, without knowing.

# How the rate is now drafted

The old framing was "8% generally, 6% on digital receipts". Section 58 has made it explicit:

• 6% — on receipts through specified banking or online modes
• 8% — on all other receipts
• Actual profit, if that is higher

Economically this is the same as 44AD. But it is now a calculation across two buckets rather than a default rate with an exception. If your accountant is still applying a flat 8% while 80% of your receipts are digital, you are paying more tax than you owe.

# The five-year lock-in — and what it costs

This is the most expensive part of the scheme and the least understood.

If you declare under Section 58 in a year, and in any of the five subsequent tax years declare below the presumptive rate, you become ineligible for Section 58 for five subsequent tax years.

And ineligibility does not just mean "no scheme". It means:

• Books must be maintained under Section 62
• An audit under Section 63 — where total income exceeds the basic exemption limit

So the price of declaring lower profit in one year can be five years of audit.

# Who cannot use the scheme

Ineligible for Section 58:

• Those in specified professions — under Section 62(1)(a) or (c)
• Those with commission or brokerage income
• Those in agency business
• Those claiming deductions under Section 141 or Chapter VIII-C

And one structural point that many people miss — the scheme is available only to resident individuals, HUFs and partnership firms. An LLP cannot use it. If you have converted your business into an LLP and assumed presumptive taxation continues, it does not.

# The connection with audit

Tax audit is now Section 63 (previously 44AB). Its relationship with Section 58 is direct:

The basic exemption limit under the new regime is ₹4,00,000. If your total income is below that, no audit applies even on declaring lower profit.

# The F&O question

This comes up every year — can F&O income be placed under the presumptive scheme?

There are two views, each with its own reasoning:

• Yes — F&O is non-speculative business income and does not appear in the exclusion list of professions, commission and brokerage, or agency.
• No — F&O "turnover" is itself a net-difference figure, not gross receipts. Applying 6% to it produces a result far below actual profit, which was not the intent of the scheme.

Two practical points sit alongside: losses cannot be carried forward under the presumptive scheme, and most F&O traders specifically need to carry losses forward. And a five-year lock-in can be very costly in a business as volatile as trading.

We do not treat it as a default. Sit down with your CA and decide.

# What to do today

1. Work out your cash receipts percentage — and include bearer cheques in it. Above 4%, change the policy now.
2. Shift receipts to banking and online modes — the difference between 6% and 8% goes straight to your tax.
3. Check your lock-in status — did you declare below the presumptive rate at any point in the last five years? Are you even eligible now?
4. If you are an LLP, plan differently — the scheme is simply not available.
5. Advance tax schedule — for those under the presumptive scheme it is 100% by 15 March, not quarterly.

Written by

Prabhakar Kumar

Chartered Accountant (ICAI, Nov 2019)

Founder of VittSphere Technologies. Practicing CA serving 200+ MSME clients across Pune. 86% win-rate at AO and CIT(A) level tax appeals. Writes on Indian taxation, capital gains, and personal finance.