Can I switch from presumptive tax to actual profit next year?
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Short answer
For professionals on section 58(2), Table row 3 (the old 44ADA), yes: the Income-tax Act, 2025 has no lock-in for row 3, though declaring profit below 50% with income above the exemption limit means books and a tax audit under section 58(3).1 For businesses on row 1 (the old 44AD), leaving the scheme within five tax years of using it bars row 1 for the next five tax years under section 58(7), and section 58(8) then requires books and an audit if income exceeds the exemption limit.1
Presumptive tax suits a freelancer with low expenses. When costs rise, for example a video studio hiring editors, a developer buying expensive hardware, or an architect subcontracting drawings, declaring actual profit from books may give a lower and more accurate figure. The question is whether you can move between the two from one tax year to the next.
Can a professional on row 3 switch?
Yes. Row 3 of the Table in section 58(2) deems 50% of gross receipts, or actual profit if higher, as profit for a specified profession.1 The five-year consequence in section 58(7) refers only to an "eligible assessee" who declared profit under row 1, so it does not apply to row 3.1
The cost of switching is compliance. Under section 58(3), if you claim that actual profit is lower than the deemed 50% and your total income exceeds the maximum amount not chargeable to tax, you must keep books under section 62 and get them audited under section 63.1
| Year | Choice | Consequence |
|---|---|---|
| Tax year 2026-27 | Declare 50% under row 3 | No audit under section 63 |
| Tax year 2027-28 | Declare actual profit of 35% | Books and audit under section 58(3), if income exceeds the exemption limit |
| Tax year 2028-29 | Back to 50% under row 3 | Allowed, if conditions are met |
The table applies sections 58 and 63 to a consultant whose receipts stay within the row 3 limit.12
What happens on row 1?
Row 1 covers "any business" for an eligible resident individual, Hindu undivided family or non-LLP firm.1 Under section 58(7), if you declare profit under row 1 for a tax year and then, in any of the five succeeding tax years, declare profit in contravention of the scheme, you cannot use row 1 for the five tax years after the year you left.1 Section 58(8) then requires books and an audit for those years if your total income exceeds the exemption limit.1
So a social media agency that uses row 1 in tax year 2026-27, then declares a lower actual profit in tax year 2027-28, is out of row 1 until after tax year 2032-33, with books and audit in between if income is above the exemption limit.1
How should I decide?
Compare your real expenses with the deemed figure: 50% of receipts on row 3, or 6% or 8% on row 1.1 If expenses consistently exceed the gap, actual profit with books may be better despite the audit cost. The comparison is in 44AD vs 44ADA, and the advance tax effect in the advance tax guide. Plan any switch with a chartered accountant (CA) before the year starts, so that books are kept from 1 April.
How did we verify this?
We checked this page against the sources below on 28 October 2026. Read our methodology or report an error.
Frequently asked questions
Does the row 1 lock-in apply if my turnover crosses ₹3 crore?+
Section 58(7) applies where you declare profit in contravention of the scheme in any of the five succeeding tax years. Becoming ineligible because turnover exceeds the limit is a different situation; confirm its treatment with a CA.1
Can I go back to row 3 after a year on actual profit?+
Yes. Row 3 has no lock-in, so a professional who meets its conditions can use it again in a later year.1
If I declare more than 50% under row 3, do I need a tax audit?+
No audit is needed under section 63 where profits are declared as per section 58(2); declaring a higher actual profit is allowed because row 3 deems 50% or actual profit, whichever is higher.12
Does switching change my advance tax dates?+
Yes. Section 408(2) lets those declaring profit under section 58(2) row 1 or row 3 pay advance tax in one instalment by 15 March, while others pay four instalments under section 408(1).3
This page is general information for Indian service exporters, not tax or legal advice. Rules change and outcomes depend on your facts, so confirm with a chartered accountant before acting.
Keep reading
What is the difference between 44AD and 44ADA for Indian freelancers?
44AD vs 44ADA, now rows 1 and 3 of section 58 of the Income-tax Act, 2025: who qualifies, 6% vs 50%, limits, lock-in and which suits freelancers and agencies.
TaxCan Indian freelancers use section 44ADA (now section 58) to pay tax on 50% of their income?
How presumptive tax for professionals works for Indian freelancers paid in foreign currency: old 44ADA, new section 58, limits, 50% income, advance tax.
TaxWhen does an Indian freelancer need a tax audit?
When an Indian freelancer or agency needs a tax audit under section 63 of the Income-tax Act, 2025: the ₹50 lakh, ₹1 crore and ₹10 crore limits, presumptive cases, dates.
TaxDo freelancers need to keep books of account?
When an Indian freelancer must keep books under section 62 of the Income-tax Act, 2025 and rule 46: specified professions, the ₹25 lakh test, and what to keep.