Presumptive Tax (1% of turnover)

Presumptive Tax is a simplified way for small businesses to handle income tax. Instead of working out your chargeable income with full accounts, you elect to pay a flat 1% of your gross income. For many small operators this is both cheaper and far less work.

To use it, your gross income must be Rs 10M or less AND your activity must sit in an eligible sector: agriculture, forestry and fishing; manufacturing (excluding restaurants); wholesale of goods; or retail of goods, including food consumed off the premises. If you qualify and elect in, you pay 1% of gross income and you are also exempt from CSR.

The big practical win is simplicity. You do not need to compute chargeable income in the usual way, so your accounting and filing become much lighter, which suits a small business without a full finance team. Note the trade-offs: no deductions, reliefs or allowances can be claimed once you elect.

To apply, you elect presumptive tax in your MRA income-tax return. It is a choice you make at filing time rather than a separate application.