Most freelancers pick between two ways of filing. One is the presumptive scheme, where the law assumes a fixed share of your receipts is profit. The other is actual books, where you add up your real income and real costs. Which one costs you less tax? It depends on one number: how much of your receipts goes on costs.
This post helps you choose. It does not repeat how the scheme works in detail. For that, and for the rates and limits, see the presumptive tax calculator.
The short version
- Professionals on the official list pay tax on 50% of their gross receipts. The list is: legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, film artist, authorised representative, company secretary, information technology, and any other profession that CBDT notifies. Graphic design, writing and marketing are not on the list, so check before you rely on this scheme. The receipts limit is ₹50 lakh, or ₹75 lakh if cash is 5% or less of the total.
- Businesses pay tax on 6% of the money received by bank transfer, UPI, card or account-payee cheque, and 8% of the rest. The turnover limit is ₹2 crore, or ₹3 crore if cash is 5% or less.
- From 1 April 2026 this is section 58 of the Income-tax Act, 2025. It replaced the old sections 44AD, 44ADA and 44AE. The rates and limits did not change.
- You cannot claim costs on top. No rent, no software, no salaries, no depreciation. The 50% is all the law lets you subtract.
- No books and no audit are needed if you stay with the scheme.
One question decides it: are your costs more or less than half?
Take a professional. The scheme taxes you on 50% of receipts. So, compare that with your real profit:
| Your real costs | Your real profit | Which is cheaper? |
|---|---|---|
| Less than 50% of receipts | More than 50% of receipts | Presumptive. You pay tax on less than you really earned. |
| Exactly 50% | Exactly 50% | Same tax. Presumptive saves you the book-keeping. |
| More than 50% of receipts | Less than 50% of receipts | Actual books may cost less tax, but you will need an audit. |
Most solo freelancers have low costs. A laptop, internet, a co-working desk and a CA's fee rarely come to half of what they earn. That is why the scheme suits them.
Worked example: ₹30 lakh of receipts, two different freelancers
Both freelancers invoice clients abroad. All the money comes into a bank account, so there is no cash and no TDS. Both are under the new tax regime for FY 2026-27.
Freelancer A: low costs. Receipts are ₹30,00,000. Real costs are ₹6,00,000, so the real profit is ₹24,00,000.
| Presumptive | Actual books | |
|---|---|---|
| Profit taxed | ₹15,00,000 (50% of receipts) | ₹24,00,000 |
| Tax with 4% cess | ₹1,09,200 | ₹3,12,000 |
| Audit needed? | No | No, because the real profit is above the presumptive profit |
Freelancer A pays ₹2,02,800 less with the scheme. With actual books A can subtract the ₹6 lakh of costs, but that still leaves ₹24 lakh to tax, which is more than the 50% the scheme assumes.
Freelancer B: high costs. Receipts are ₹30,00,000. Real costs are ₹20,00,000, because B pays two assistants and rents an office. The real profit is ₹10,00,000.
| Presumptive | Actual books | |
|---|---|---|
| Profit taxed | ₹15,00,000 | ₹10,00,000 |
| Tax with 4% cess | ₹1,09,200 | ₹0 (the rebate covers income up to ₹12 lakh) |
| Audit needed? | No | Yes, because the profit is below 50% of receipts |
Freelancer B saves up to ₹1,09,200 in tax with actual books. But B must keep proper books and pay a CA for the audit. The saving is real only if the CA's fee and the extra work cost less than that.
These tax figures use the new-regime slabs and rebate on the calculator for FY 2026-27, with no other income. Your own figure will change with salary, other income, TDS and deductions you are allowed under your regime.
Four mistakes that cost freelancers money
- Counting GST as receipts. Receipts for this scheme leave out GST. If you invoiced ₹10 lakh plus ₹1.8 lakh GST, your receipts are ₹10 lakh.
- Missing the 15 March date. Under the scheme the whole year's advance tax is due in one payment on 15 March, not four. Interest starts if you pay late. See advance tax and interest for how the interest is worked out.
- Crossing the limit without noticing. If your receipts pass ₹50 lakh, or ₹75 lakh with low cash, you are out of the scheme for that year and need books. Check the total, not just one client's invoices.
- Treating every cheque as a bank receipt. A cheque or bank draft that is not account payee counts as cash under section 58(9). A few of these can push your cash share over 5% and take away the higher ₹75 lakh (or ₹3 crore) limit.
What section 58 says about choosing books
Section 58(3). If you claim that your real profit is lower than the presumptive profit, and your total income is above the maximum amount that is not taxed, you must keep books of account (as section 62 requires) and get them audited (as section 63 requires). This is the rule that Freelancer B runs into. The text applies to any assessee who fits the table and makes that claim. Commentary such as Taxscan's note on section 58(3) asks whether it also catches people who never chose the scheme but show thin margins. If that could be you, ask a CA before you file. This post cannot settle that point.
Section 58(7) and (8): the five-year lock-out is for businesses only. It is written for the business row of the table (serial 1), not the profession row. A business that uses the scheme, and then declares a lower profit in any of the next five tax years, cannot use the scheme for five tax years after that. While locked out, it needs books and an audit if its total income is above the untaxed limit. The text does not apply this lock-out to professionals, so a freelancer under the profession row can move between the scheme and books from year to year. A CA should still look at your own facts before you switch.
A simple way to decide
- Add up your receipts for the year, without GST.
- Add up your real costs.
- If costs are under half of receipts, use the scheme. You pay less and have nothing to audit.
- If costs are over half, ask a CA for a rough number: the tax saved with books, less the audit fee. Choose books only if that number is clearly positive.
- If your tax after TDS is ₹10,000 or more, put 15 March in your calendar.
Enter your numbers in the presumptive tax calculator to see the presumptive tax and the 15 March payment, then compare it with your real profit.
Sources
- Section 58, Income-tax Act, 2025 — Income Tax Department (official text, read 6 November 2026)
- FAQs on Tax on Presumptive Taxation Scheme — Income Tax Department (PDF, says it covers the Act as amended by the Finance Act, 2026)
- Analysis of presumptive taxation under section 58, Income-tax Act 2025 — TaxGuru
- Does the Income-tax Act 2025 expand the tax audit net? What section 58(3) means — Taxscan
The rates, limits, audit rule and lock-out in this post come from the text of section 58 on the Income Tax Department's website, which showed a "last reviewed" date of 26 October 2026. We have not read section 62(4) itself or any CBDT notification. The list of professions comes from the department's FAQ, which also confirms the 15 March payment date and that a cheque that is not account payee counts as cash. The tax figures in the examples use the slabs and rebate on our own calculators, not the Act text. We did not check the ₹10,000 advance tax threshold or the ITR form against the Act. This is information, not tax advice. Confirm your own case with a CA before you file.