Budget 2025: Presumptive tax regime may be expanded to cover AI, data centres, cloud computing and others

The Union Budget on February 1 could bring significant changes to the presumptive tax regime. According to a report by Economic Times, it may be expanded to include sectors like data centres, cloud computing, artificial intelligence (AI), semiconductors, biochemistry, and green technology. These additions aim to support innovation and entrepreneurship in India’s frontier technologies.
The report cites sources familiar with the discussions who said that the finance minister is expected to unveil a roadmap for these changes. The turnover limit for businesses eligible under this framework could be raised from Rs 2 crore to Rs 5 crore. “The proposal is to widen the scope and ambit of presumptive taxation and this will be accompanied by other measures to boost research and innovation in new-age technology,” a senior official told the publication.
Currently, the presumptive taxation regime is available to specific sectors, including small businesses with a turnover of up to Rs 2 crore and professionals like doctors, where the threshold is capped at Rs 75 lakh. In the July budget last year, the government had extended this scheme to non-residents operating cruise ships, allowing them to calculate taxable income as 20% of their passenger revenue.

The presumptive taxation framework simplifies tax compliance by presuming a fixed percentage of turnover or gross receipts as taxable income, regardless of actual expenses incurred. As outlined in an Income Tax Department FAQ “A person opting for this scheme can declare income at a prescribed rate and is thereby relieved from maintaining detailed books of account”.

As part of this initiative, amendments to Sections 44AD and 44ADA of the Income Tax Act may also be introduced. These changes are designed to foster entrepreneurship and innovation while providing much-needed support to small businesses and professionals.