Presumptive Tax Filed? 1 Rule May Trigger Your Audit

Small business owners using the easy presumptive tax scheme must watch out: if you declare profit below the standard rate, India's new Income-tax Act 2025 now clearly requires a tax audit. Here is what that means for you.

Here's what happened: The Income-tax Act 2025 now explicitly states that businesses under presumptive taxation must face a mandatory audit if they declare profit below the standard presumptive rate (8% for cash turnover, 6% for digital).. Earlier, the law was ambiguous on this audit trigger, creating confusion for small business owners and their chartered accountants about when an audit was actually required.. This change brings legal certainty but also raises compliance stakes — freelancers, traders, and small firms using Section 44AD or 44ADA must now plan their profit declarations carefully..

What you should do: Check your declared profit percentage against the 8% (cash) or 6% (digital receipts) presumptive threshold before filing your ITR this year.. If your actual profits are genuinely lower, consult a CA immediately — you will need proper books of accounts maintained to survive a mandatory audit.. Avoid randomly reducing declared income to lower your tax without records; under the new Act, this directly invites an audit and potential penalties..

If more than 60% of your business receipts come via UPI, NEFT, or cards, your audit threshold is 6% — not 8% — meaning you get a small but real tax advantage on digital sales.