Section 44AF — Retail Business Presumptive (Legacy)

Chapter IV-D — Profits and Gains of Business or ProfessionITA 1961Up to AY 2026-27

STATUTORY ARCHITECTURE — 18-ROW MAP

Statutory text — Income-tax Act, 1961

Special provisions for computing profits and gains of retail business.

44AF. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an

assessee engaged in retail trade in any goods or merchandise, a sum equal to five per cent of the total

turnover in the previous year on account of such business or, as the case may be, a sum higher than the

aforesaid sum as declared by the assessee in his return of income shall be deemed to be the profits and gains

of such business chargeable to tax under the head "Profits and gains of business or profession" :

Providedthat nothing contained in this sub-section shall apply in respect of an assessee whose total turnover

exceeds an amount of forty lakh rupees in the previous year.

(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section

(1), be deemed to have been already given full effect to and no further deduction under those sections shall

be allowed :

Provided that where the assessee is a firm, the salary and interest paid to its partners shall be deducted from

the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of

section 40.

(3) The written down value of any asset used for the purpose of the business referred to in sub-section (1)

shall be deemed to have been calculated as if the assessee had claimed and had been actually allowed the

deduction in respect of the depreciation for each of the relevant assessment years.

(4) The provisions of sections 44AA and 44AB shall not apply in so far as they relate to the business

referred to in sub-section (1) and in computing the monetary limits under those sections, the total turnover

or, as the case may be, the income from the said business shall be excluded.

(5) Notwithstanding anything contained in the foregoing provisions of this section, an assessee may claim

lower profits and gains than the profits and gains specified in sub-section (1), if he keeps and maintains such

books of account and other documents as required under sub-section (2) of section 44AA and gets his

accounts audited and furnishes a report of such audit as required under section 44AB.

(6) Nothing contained in this section shall apply to any assessment year beginning on or after the 1st day of

April, 2011.

Function in the statutory architecture

Section 44AF applied to an assessee engaged in retail trade in any goods or merchandise whose total turnover in the previous year did not exceed Rs 40 lakh. Five per cent of the total turnover, or a higher sum declared in the return, was deemed to be the profits and gains of the business, overriding ss. 28 to 43C.

Deductions under ss. 30 to 38 were deemed already allowed; a firm could still deduct salary and interest to partners within s. 40(b) limits. Written down value of business assets was computed as if depreciation had been allowed for each year.

Operative consequences

Sections 44AA and 44AB did not apply to the retail business, and its turnover and income were left out of their monetary limits (sub-section (4)).
An assessee could return lower profits only by keeping books under s. 44AA(2) and getting them audited under s. 44AB (sub-section (5)).

Status

The section is not operative for AY 2026-27. Sub-section (6) provides: “Nothing contained in this section shall apply to any assessment year beginning on or after the 1st day of April, 2011.” The Finance Act, 2026 does not amend this section.

The 1961 Act governs AY 2026-27 and earlier assessment years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject there is no provision in the Income-tax Act, 2025.

← All sections (940)Act 1961 hub

Income-tax Act, 1961	Income-tax Act, 2025
s. 44AF — presumptive profits of retail trade at 5 per cent of turnover	No corresponding provision in the Income-tax Act, 2025; presumptive taxation of resident businesses is in s. 58 (counterpart of s. 44AD)