Presumptive Taxation: Can You Legally Pay Zero Tax at ₹20–24 Lakh Income?

Most freelancers and small business owners assume that earning ₹20–24 lakh a year automatically means a meaningful income tax bill. Under the current presumptive taxation rules combined with the tax rebate, that's often not true — and understanding why can change how you plan your finances, not just how you file.

What presumptive taxation actually is. Instead of maintaining detailed books of account and getting them audited, eligible taxpayers can declare a fixed percentage of their turnover or gross receipts as taxable income — full stop. No itemised expense tracking, no mandatory audit, and dramatically simpler compliance, as long as you qualify.

The current rules — Section 58 of the Income Tax Act, 2025. The earlier separate provisions for businesses (Section 44AD), professionals (Section 44ADA), and goods-carriage operators (Section 44AE) have been consolidated into a single Section 58 under the new Act, with the same thresholds carried forward. For businesses: turnover up to ₹3 crore (if at least 95% of receipts are digital) or ₹2 crore otherwise, with presumptive income deemed at 6% (digital) or 8% (non-digital) of turnover. For professionals — consultants, freelancers, designers, and similar service providers — gross receipts up to ₹75 lakh (95% digital) or ₹50 lakh otherwise, with presumptive income deemed at 50% of receipts.

Worked example. Say you're a consultant billing ₹24 lakh a year, almost entirely through bank transfers. Under the professional presumptive scheme, your taxable income is deemed to be 50% of receipts — ₹12 lakh — regardless of what you actually spent running your practice.

Where the 'zero tax' part comes in. Section 157 of the Income Tax Act, 2025 (formerly Section 87A) currently provides a full rebate for resident individuals under the new tax regime with taxable income up to ₹12 lakh — bringing the tax payable to nil, with marginal relief cushioning incomes just above that line. In the example above, ₹24 lakh in gross billing produces a presumptive taxable income that lands exactly at the rebate threshold — meaning the actual income tax liability can come down to zero, entirely legally.

The catch — this is income tax only. Zero income tax liability says nothing about GST, which has its own separate registration threshold (₹20 lakh for services in most states) and its own compulsory-registration triggers. A consultant billing ₹24 lakh with zero income tax payable can still owe GST registration, filing, and payment. Don't let 'no income tax' get confused with 'no GST obligation' — they're entirely separate laws.

Who this works well for. Freelancers, consultants, and small traders comfortably under the relevant turnover ceiling, especially those without large deductible expenses to itemise — since opting into the presumptive scheme means you give up claiming individual business deductions in exchange for the flat percentage.

If you're earning in this range and want your GST and income tax filings coordinated so you're not caught out on one while optimising the other, that's exactly what our ITR filing and GST services are built to handle together.

Figures and section references in this article reflect the Income Tax Act, 2025 (effective 1 April 2026), as amended by Union Budget 2026. Tax rules change frequently — please confirm current figures with a qualified CA before making a compliance decision. This is general information, not personalised tax advice, and does not cover GST, which is a separate obligation.