Presumptive income is 6% on receipts through banking channels and 8% on cash. The same turnover, collected differently, produces a materially different tax bill — and the cash mix also decides whether your ceiling is ₹2 crore or ₹3 crore.
Presumptive taxation removes the books. It does not remove the arithmetic behind whether it suits you.
Cash receipts are presumed to yield 8% profit against 6% for money received through banking channels — a two percentage point difference applied to turnover, not to profit. Separately, the higher turnover ceiling of ₹3 crore is available only if cash receipts are 5% or less of total turnover. A business at ₹2.4 crore with 8% cash is therefore outside the scheme altogether, not merely taxed a little more.
Once you are in 44AD, deductions under Sections 30 to 38 are deemed to have been allowed — rent, salaries, depreciation, interest, everything. Depreciation is treated as already claimed, and the written down value is reduced as if it had been. Since the 2017 amendment, a firm cannot deduct partner salary or interest from presumptive income either, which changed the arithmetic materially for partnership firms.
Section 44AD(4) is the clause people meet too late. Declare under 44AD, then in any of the next five years declare lower profits, and you are barred from the scheme for five subsequent assessment years — and for those years you must maintain books and get them audited if your income exceeds the basic exemption limit. Entering 44AD for one convenient year and stepping out the next is the single most expensive mistake in this section.
A presumptive assessee pays the whole advance tax in a single instalment by 15 March, rather than in four instalments across the year. It is a genuine simplification — but missing that one date attracts interest under Section 234C on the full amount, and the shortfall then feeds Section 234B as well.
The calculator does the arithmetic. TaxSphere — our free case-law library, 1,184 authorities and the Act in full — has the judgments, the circulars and the statutory text for the same provision.
