Section 58 replaces 44AD: recompute your agency's tax

If you've been filing your travel agency's tax return under Section 44AD, that section doesn't exist anymore. The Income-tax Act, 2025 came into force from 1 April 2026, applying from FY 2026-27, and it folds 44AD, 44ADA and 44AE into a single new provision: Section 58 (ClearTax; TaxGuru). The presumptive rates you know, 8% of turnover, 6% where receipts come in digitally, look unchanged. That's exactly why most agents will assume nothing has moved.

Something has. Section 58 quietly switches off three things a partnership or LLP agency used to lean on: carrying forward old losses against this year's presumptive income, claiming unabsorbed depreciation, and deducting partner salary or interest before arriving at the taxable figure. If your firm routes ₹8-10 lakh a year through partner remuneration the way most two- or three-partner agencies do, your tax bill can move even though the headline rate on your visiting card hasn't changed at all.

This post walks through what actually changed, what didn't, and gives you a worked comparison so you can recompute before you file for FY 2026-27.

What actually changed on 1 April 2026 (and what didn't)

Section 58 of the Income-tax Act, 2025 consolidates the old Sections 44AD (business), 44ADA (professionals) and 44AE (goods carriages) into one presumptive-taxation framework, in force from FY 2026-27 (TaxGuru). The deemed-profit rates carried forward are the same numbers agents already know: 8% of turnover generally, 6% where receipts are digital, and 50% of gross receipts for professionals (TaxGuru).

Read only the rate table and you'd close the file thinking this is a renumbering exercise: 44AD becomes 58, same percentages, move on. That's the trap. The rates are cosmetic continuity. The mechanics that sit underneath the rate, what you can and can't set off against the presumptive figure, moved with the new Act, and that's where a real firm's tax bill actually lives.

None of this touches turnover thresholds, GST registration, or your invoicing format. Those run on separate rules entirely.

Turnover is still your gross package billings, not your margin

The turnover test under Section 58 still means your gross package billings, not your profit margin, the same trap that broke agents under old 44AD. Commission and brokerage income stays excluded from presumptive treatment; only package-selling turnover, where you buy at net rate and resell at your own price and risk, can qualify (ClearTax).

This is the same distinction the 44AD trap post walked through last season, and the core logic hasn't changed for FY 2026-27: if you earn commission on ticketing, hotel booking, or visa processing, that income was never eligible for presumptive taxation, under the old section or the new one. What's different this year is only the numbering and, as covered below, what happens after you compute the presumptive figure. If you run mixed streams, commission on some clients and packaged tours sold at your own price to others, keep working out the split stream by stream. Section 58 doesn't change that requirement.

Worth restating because it still catches agents every filing season: turnover means what passed through your books as your package price, not the margin you kept after paying the hotel or DMC. An agency billing ₹1.2 crore in package sales is testing eligibility and computing the presumptive figure against ₹1.2 crore, not against the ₹14-15 lakh it may have actually earned.

The three deductions Section 58 quietly switches off

Section 58 disallows three things a firm could previously use to reduce its effective tax below the flat presumptive rate: brought-forward losses, unabsorbed depreciation, and partner remuneration. Each is a separate mechanism, and each is reported here as current trade-press reporting rather than confirmed against the bare Act text, so treat the detail as a flag to verify with your CA, not a final word.

Brought-forward losses can no longer offset presumptive income. If your agency carried a loss from a bad season, a cancelled departure season, or a slow post-monsoon quarter, that loss used to sit on your books waiting to reduce a future year's taxable income. Under Section 58, prior losses are treated as fully absorbed within the declared presumptive percentage itself (TaxGuru). The loss doesn't carry forward to reduce this year's 8% or 6% figure.

Unabsorbed depreciation is treated as fully absorbed. Depreciation on your office setup, vehicles, or equipment that you hadn't fully claimed in earlier years can't be pulled forward and set against the presumptive income either (TaxGuru). Same logic: the presumptive percentage is deemed to already account for it.

Partner salary and interest are disallowed against the presumptive figure. This is the one that hits partnership and LLP agencies hardest. Under the old law, a firm computing presumptive income could still deduct partner remuneration and interest on capital, within prescribed limits, before arriving at the firm's own taxable profit. Section 58 blocks that deduction against the presumptive figure entirely (TaxGuru).

Careful: if your firm's tax planning has quietly relied on paying partners ₹8-10 lakh a year in remuneration to shrink the firm's own taxable presumptive income, that lever is gone under Section 58. The remuneration itself isn't illegal or disallowed as an expense in your accounts. It's disallowed specifically as a deduction against the presumptive tax computation. Confirm the exact treatment with your CA before you set this year's partner pay structure.

Side-by-side: the same agency, old 44AD vs new Section 58

Say you run a two-partner travel agency with ₹1.2 crore in gross package billings for the year and a genuine operating margin of about ₹14 lakh after all real costs. This is a hypothetical for illustration, not a reported figure. Under the old 44AD regime and under new-Act Section 58, the presumptive starting point looks identical, and the outcome doesn't.

Step	Old 44AD (FY 2025-26)	New Section 58 (FY 2026-27)
Gross package turnover	₹1,20,00,000	₹1,20,00,000
Presumptive rate (digital receipts)	6%	6%
Deemed presumptive income	₹7,20,000	₹7,20,000
Partner remuneration deduction	Allowed within old prescribed limits (illustratively, say ₹9,00,000 combined for two partners)	Disallowed against the presumptive figure
Firm's taxable presumptive income after remuneration	Reduced, roughly ₹0 or a modest residual, before individual partner-level tax on the remuneration itself	₹7,20,000 (full deemed figure taxed at the firm level)

Under the old structure, a chunk of that ₹7,20,000 deemed profit effectively shifted to the partners' individual returns as remuneration, taxed at their personal slab rates, which for many owner-operators lands lower than the flat presumptive hit at the firm level once remuneration is stripped out. Under Section 58, the firm's presumptive income stands at the full ₹7,20,000 with no remuneration deduction to route around it.

Example: This hypothetical firm isn't automatically worse off in rupee terms just because a deduction disappeared; the comparison depends heavily on the actual remuneration limits under the old law, the partners' individual slab rates, and how the new Act taxes the firm versus the partners going forward. The point of this table is the mechanic, not a specific rupee delta you should copy into your own return. Run your own firm's numbers, ideally with your CA, before assuming the shift helps or hurts you.

When declaring below the presumptive rate forces an audit

Under the old regime, a tax audit becomes mandatory when a taxpayer declares income below the presumptive percentage and total income exceeds the basic exemption limit (ClearTax). That trigger logic is expected to carry through in some form under the new Act, but the exact new-Act section number and the current exemption thresholds for FY 2026-27 could not be confirmed from a reliable source this session, so this post won't print one.

What agents should take from this in plain terms: if your genuine margin runs below the 6-8% deemed rate, and you declare that lower actual figure instead of opting into the presumptive scheme, you likely trigger a mandatory audit requirement, the same way opting out of the old 44AD's deemed rate did. The exemption-limit figures that decide "total income" for this test also change year to year and regime to regime (old tax regime versus new). Don't rely on last year's exemption number when you file this year. Confirm the current section reference and threshold with your CA before deciding whether to declare below the presumptive rate.

Who should still opt in, and who shouldn't

Presumptive taxation under Section 58 still suits a specific kind of agency: one whose genuine margin comfortably clears 6-8% of turnover, and one that doesn't route significant partner pay through the firm as a tax-reduction lever. For that agency, presumptive filing is still the same trade it always was: skip detailed books, accept a flat deemed profit, and move on with ITR-4.

Firms in a different position need to model both ways before choosing, not assume presumptive is still the automatically easier option:

• Firms carrying real brought-forward losses from a bad season or two, since those losses no longer reduce this year's presumptive figure.
• Firms with meaningful unabsorbed depreciation sitting on the books, particularly ones that invested heavily in vehicles, office fit-out, or equipment in a low-income year.
• Multi-partner firms that structured partner remuneration into their deed specifically to bring down the firm's own taxable income.
• Any firm whose real margin runs close to or below the 6-8% deemed rate, since declaring under that rate now carries the audit exposure described above.

If any of those apply, sit down with your tour costing sheet and your actual books, and have your CA run the comparison on both bases before you decide how to file for FY 2026-27. Don't take "the rate is the same as last year" as the whole answer.

Common questions

What is Section 58 of the Income-tax Act 2025?

Section 58 is the new Act's consolidated presumptive-taxation provision, replacing the old Sections 44AD (business), 44ADA (professionals) and 44AE (goods carriages) with a single section, effective from FY 2026-27. The deemed-profit rates carried forward unchanged: 8% of turnover generally, 6% where receipts are digital, and 50% for professionals.

What does Section 58(2) of the Income-tax Act 2025 say?

This session could not verify the specific text of Section 58(2), 58(3) or 58(4) against a primary government source (only one trade publication, TaxGuru, was reachable, and no direct Act text could be confirmed). Rather than guess at subsection-level detail, read the bare Act text on the official government portal or ask your CA to walk you through the specific subsections that apply to your filing.

Does the old 44AD five-year lock-in still apply under Section 58?

Under the old law, opting out of presumptive taxation before completing five continuous years inside the scheme barred you from re-entering it for the following five assessment years (Tax2Win). Whether that same lock-in logic carries forward unchanged into Section 58 of the new Act wasn't confirmed by any source checked this session. Treat the old lock-in as the likely starting assumption, and confirm with your CA whether it applies identically before you opt in or out for FY 2026-27.

Will my ITR-4 filing change because of Section 58?

The form itself, ITR-4 (Sugam), is meant for taxpayers filing under a presumptive scheme without maintaining regular books (Income Tax Department), and that purpose doesn't change. What changes is the section you're filing under and, if your firm is a partnership or LLP that relied on remuneration or loss set-off, potentially the figure you're declaring. Confirm the current-year ITR-4 instructions on the income tax e-filing portal before you file.

The short version

• Section 58 of the Income-tax Act, 2025 replaces old Sections 44AD, 44ADA and 44AE from FY 2026-27. The presumptive rates (8% general, 6% digital, 50% professionals) look unchanged.
• The rate staying the same is the trap: three deductions firms used to rely on are disallowed against the presumptive figure: brought-forward losses, unabsorbed depreciation, and partner salary/interest.
• Turnover for this test is still gross package billings, not margin. Commission and brokerage income stays outside presumptive treatment, same as under old 44AD.
• Partnership and LLP agencies that routed ₹8-10 lakh a year through partner remuneration to lower the firm's taxable presumptive income should recompute this year, since that lever is gone under Section 58.
• Declaring income below the presumptive rate still risks triggering a mandatory tax audit; the exact new-Act section and current exemption thresholds need CA confirmation before you file.
• Model both bases (presumptive vs actual books) if you carry old losses, meaningful depreciation, or partner-remuneration structures. Don't assume presumptive is still the easy default just because the headline rate didn't move.
• Confirm every figure and section reference in this post against the bare Act text or your CA before filing FY 2026-27; this area moved on 1 April 2026 and reliable primary sources were limited at the time of writing.