₹2 crore turnover, zero tax? The presumptive scheme for small businesses
If you run a small business — a shop, kirana store, trading or manufacturing unit — you can legally have a turnover of up to ₹2 crore and pay zero income tax. The route is presumptive taxation under Section 44AD (carried into Section 58 of the new Income Tax Act 2025), and it rewards going digital. Here's exactly how it works, the rules, and the conditions that matter.
The math, step by step
- Turnover: up to ₹2,00,00,000, received digitally (UPI / bank transfer).
- Presumed profit: declare 6% of turnover (the digital rate) = ₹12,00,000.
- Tax under the new regime: taxable income up to ₹12 lakh attracts zero tax after the Section 87A rebate.
- Result: ₹0 tax — legally.
Cash matters. The presumed profit is 8% on cash receipts and 6% on digital receipts — so the more you collect through UPI and bank transfers, the lower your presumed profit, and the lower your tax.
The rules
Section 44AD is for resident individuals, HUFs and partnership firms (not LLPs) running eligible businesses — retail, kirana, trading, manufacturing and the like.
- Turnover limit ₹2 crore (or ₹3 crore if cash receipts are 5% or less of turnover).
- Declare 6% (digital) / 8% (cash) of turnover — or your actual profit, whichever is higher.
- No detailed books of account and no tax audit required.
The conditions that matter
- Zero tax needs the new tax regime and no other large income (the ₹12 lakh rebate does the work).
- Declare below 6% / 8%, and you must maintain books and get a tax audit.
- Not available to professionals (they use Section 44ADA / 58), or to commission, brokerage and agency income, or LLPs.
- Once you opt in, you should stay in the scheme for 5 consecutive years — opting out early locks you out for the next 5 years.
- Section 44AD applies for FY 2025-26; from FY 2026-27 the same scheme sits under Section 58.
Takeaway: A ₹2 crore, all-digital small business can legally pay zero income tax under presumptive taxation — collect digitally, and plan it right.
Want to check whether this fits your business? Talk to us — we'll run your numbers.
AI-assisted note, reviewed by Chartford Consultancy. Rules and figures can change with government notifications — talk to us to confirm exactly what applies to your business.
