No income tax changes in Budget 2026: How presumptive tax apply for consultants under old and new regimes

• Old and new tax regimes for consultants remain unchanged in Union Budget 2026
• Section 44ADA allows consultants to claim 50% income as expenses under presumptive tax.
• Consultants receive more tax benefits than LLPs or private companies.

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Finance Minister Nirmala Sitharaman has kept both the old and new tax regimes largely unchanged in the Union Budget 2026. In such a scenario, consultants will continue to navigate familiar tax rules for the financial year 2026-27.

The Income Tax Act, 1961, allows consultants to opt for presumptive taxation under Section 44ADA with a net taxable income of up to Rs 75 lakh, wherein 50 percent of the income can be treated as expenses and pay tax on the remaining 50 percent.

While consultants can opt for presumptive taxation under both tax regimes, here’s a look at how the scheme works, its key benefits, dos and don’ts, and the tax rules that apply.

Presumptive taxation: Old vs. new tax regime

The presumptive taxation rule has been balanced in such a way that while key taxation benefits do not apply under the new tax regime, consultants opting for the old regime face higher tax slab rates.

Besides the 50 percent deduction on the overall income, old regime consultants can further lower their taxable income under various sections of the Income Tax Act.

Section 80C, for example, allows professionals to claim deductions of up to Rs 1.5 lakh a year through investments in PPF, EPF, ELSS mutual funds, LIC premiums, home loans, and similar instruments.

Section 80CCD(1B) gives an additional deduction for investments in the National Pension System (NPS), encouraging retirement savings. Section 80D offers deductions on health insurance premiums paid for self, family, and parents.

Section 80TTA allows a deduction on interest earned from savings accounts. An additional deduction up to Rs 25,000 shall be available for health insurance premiums under section 80D of the IT Act.

Here’s the tax comparison showing how the new taxation will change the tax structure of a consultant under the new and old tax regimes.

Individual consultant vs. consulting firms

Tax analysts reason that for most people, staying an individual consultant remains the most tax-efficient option until income becomes very high.

“With Section 44ADA, tax is applied on half of their receipts, though there is minimal compliance, and withdrawing money for personal use has no tax implications. Even under regular taxation, tax is paid only on actual profit, and funds can be withdrawn without any additional tax,” said Ritika Nayyar, Partner, Singhania & Co.

For a consultant operating as a Limited Liability Partnership (LLP) firm, the profits they earn are taxed at a flat 30 per cent and do not qualify for the benefit of Section 44ADA. Compliance increases and withdrawing money also have rules and limits.

On the other hand, a Private Limited Company becomes efficient only when profits are large, and the money is kept inside the business. “Certain sections offer lower rates of corporate tax, but withdrawals can be made only in the form of dividends, which have an additional tax liability,” said Nayyar.

Tips for consultants to plan and pay quarterly advance taxes

According to SR Patnaik, Partner (head-taxation), Cyril Amarchand Mangaldas, consultants must keep invoices, bills, tickets, screenshots, and proof of payment for everything to support such a claim.

He suggests —

• Estimate the total income at the beginning of the year, and accordingly plan payment of the quarterly advance taxes.
• Keep in mind the deadlines for payment of advance taxes in each quarter to avoid interest because of underpayment of advance taxes.
• Review and revise estimated income before every due date so that the calculation remains relevant throughout the year.
• Separate personal expenses from business expenses and keep proof of expenses incurred during the course of the year.
• Keep official income, expenses and bank accounts separate from personal so that the segregation is maintained throughout the year.

Profession-related expenses that can be used to claim deductions

• All expenses, which are directly related to their business and profession, such as office rent, utilities, maintenance, laptops, phones, and basic equipment.
• Travel for work –cabs, flights, fuel, hotels
• Communication costs like mobile, Wi-Fi, software, etc.
• Marketing and content costs, such as ads, photoshoots, design services, and freelancer payments, are deductible too.
• Professional fees, training courses, memberships, bank charges, payment gateway fees, stationery, books, gifts for clients, and meeting refreshments are also tax-deductible.

Tip for using part of home as office for presumptive taxation

Tax analysts suggest that consultants should properly plan the portion of the house that is proposed to be used as an office and allocate relevant expenses— phone, electricity bills, other miscellaneous expenses and utilities —being used for official purposes. If the actual expenses incurred for the office are available, then the same may be claimed as a deduction.