The Income-tax Act, 2025 appears to have made a significant compliance change for small taxpayers opting for, or falling within, the presumptive taxation framework. The concern arises from Section 58(3), which states that where an assessee covered by the presumptive taxation table claims actual profits lower than the prescribed presumptive profits, and total income exceeds the basic exemption limit, the assessee must maintain books and get accounts audited.
What Section 58 Covers
Section 58 of the Income-tax Act, 2025 consolidates presumptive taxation for residents. It covers eligible businesses, transport operators and specified professionals. For eligible businesses, the presumptive profit continues to be computed broadly at 6% for specified banking/online receipts and 8% for other receipts, with turnover limits of ₹2 crore or ₹3 crore where cash receipts do not exceed 5%.
For specified professionals, the presumptive rate is 50% of gross receipts, with the limit being ₹50 lakh or ₹75 lakh where cash receipts do not exceed 5%.
The Key Change: Section 58(3)
The controversial part is Section 58(3). It says that any assessee mentioned in the presumptive table who claims that actual profits are lower than the presumptive profits and whose total income exceeds the basic exemption limit shall be required to:
- maintain books of account under Section 62; and
- get the accounts audited and furnish audit report under Section 63.
This wording is important because it is not expressly linked only to taxpayers who had earlier opted into presumptive taxation and then violated a five-year continuity condition. It appears to operate directly whenever profits are declared below the presumptive percentage and total income crosses the exemption limit.
Why Small Businesses May Be Hit
Take a small shopkeeper having turnover of ₹80 lakh and actual profit of 4%. Since the presumptive profit would ordinarily be 6% or 8%, declaring 4% may trigger Section 58(3) if total income exceeds the basic exemption limit.
This means that even where turnover is far below ₹1 crore, the taxpayer may still be required to maintain books and undergo tax audit merely because the declared profit is below the presumptive benchmark.
Bigger Impact: Salaried Persons Doing F&O Trading
The wider impact may be seen in F&O trading cases. F&O income is generally reported as business income, and recent return-filing guidance has also required F&O traders to report it under specific business codes.
Example:
Salary income: ₹25 lakh
F&O turnover: ₹80 lakh
F&O profit: ₹50,000
Here, the business profit is much below 6% of turnover. Since total income exceeds the basic exemption limit because of salary income, the taxpayer may be pulled into audit under Section 58(3), even though the F&O activity itself generated only a small profit.
Why This Is Different From the Earlier Understanding
Under the post-2016 Section 44AD regime, many taxpayers and professionals interpreted audit exposure for small businesses as being tied to the specific presumptive taxation conditions, especially the five-year lock-in and opt-out consequences. The new Section 58(3), however, is drafted in broader language and may make the audit trigger more direct.
Practical Takeaway
Small businesses, professionals and salaried F&O traders should not assume that low turnover automatically means no tax audit. If declared business profit is below 6%, 8% or 50%, as applicable, and total income exceeds the basic exemption limit, Section 58(3) may become a major compliance trigger from the new law regime.
Note: Yes, the Income-tax Act, 2025 may have quietly widened the practical scope of tax audit for small taxpayers, especially F&O traders and salaried individuals with side business income.
