Looking for expert help with income tax for bakery owners and home bakers India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Who is this guide for? If you own a bakery, run a home baking business, operate a cake shop, supply bread and biscuits wholesale, or sell baked goods through Swiggy, Zomato, or Instagram in India, this guide covers your complete income tax obligations for AY 2026-27 (FY 2025-26): income classification, Section 44AD presumptive taxation, business codes 01099 and 09002, GST at 0% to 5% on bakery products under GST 2.0, FSSAI licensing, TDS under Section 194C and 194-O, deductible business expenses, depreciation, and ITR filing.
India has over 3 lakh bakeries and an estimated 15 lakh home bakers selling through social media and delivery platforms. The bakery industry contributes over Rs 35,000 crore annually, yet most bakery owners file taxes without understanding the rules specific to their business: GST at 5% on cakes and pastries (reduced from 18% under GST 2.0), the 0% rate on plain bread, the composition scheme choice between 1% manufacturer rate and 5% restaurant rate, FSSAI registration tiers, and the Section 44AD presumptive scheme that simplifies everything for small bakeries.
This guide covers every tax obligation a bakery owner or home baker faces. If you run a related food business, see also our guides for caterers and food truck operators, restaurant and cafe owners, and e-commerce sellers on Swiggy and Zomato.
How Bakery Owners and Home Bakers Earn Income
Bakery income comes from multiple channels, often within the same business:
Tax Rate Chart
Common Revenue Streams for Bakery Businesses
Typical ranges; actual revenue varies by city, scale, and product mix
Counter Sales (Walk-in Customers)
Bread, biscuits, cakes, pastries sold over the counter; cash-heavy for small bakeries
Bulk and Wholesale Orders
Hotels, restaurants, hostels, corporate canteens; recurring monthly contracts
Custom Cake and Event Orders
Birthday cakes, wedding cakes, festive orders; higher margins but seasonal
Online Delivery (Swiggy, Zomato)
Growing channel; 25% to 35% commission deducted by platform; TDS 194-O applies
Instagram and Social Media Orders
Primary channel for home bakers; UPI payments; no platform commission
Institutional Supply (Schools, Hospitals)
Tender-based for large bakeries; TDS deducted by institution under 194C
Source: Industry estimates based on NRAI data, IMARC Group, and Tax Garden client filings (FY 2025-26)
A neighbourhood bakery in a metro city with steady footfall earns Rs 15 lakh to Rs 60 lakh per year. A mid-size bakery with wholesale supply earns Rs 60 lakh to Rs 2 crore. A home baker taking Instagram and WhatsApp orders for custom cakes earns Rs 3 lakh to Rs 20 lakh per year. A chain bakery or franchise operation can exceed Rs 5 crore annually.
Income Classification: Business Income
Bakery income is classified as Profits and Gains of Business or Profession under the business head (Section 28 of the Income Tax Act, 1961). Running a bakery or home baking business is a business activity. It is not a "specified profession" under Section 44AA (Section 62 under ITA 2025).
You use Section 44AD (Section 58, ITA 2025), not Section 44ADA.
The "pastry chef as professional" misconception
Some bakery owners who are trained pastry chefs attempt to classify their income as professional income under Section 44ADA to declare 50% deemed profit instead of 6% or 8%. This is incorrect. A pastry chef running a bakery is operating a business, not practising a profession listed under Section 44AA. Culinary arts do not appear in the specified professions list (legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, authorised representative, company secretary, information technology, and film artist). Misclassification triggers scrutiny and reassessment.
Business code for bakeries
Tax Rate Chart
Business Codes for Bakery Businesses
Select the code matching your primary activity in ITR-4 or ITR-3
01099 - Manufacturing (Others)
Covers bread, biscuit, cake, pastry, rusk manufacturing; production-focused bakeries
09002 - Restaurants, Bars, Canteens, Catering
Bakery cafes, cake shops with seating, counter-service bakeries
10001 - Food Delivery and Restaurant Services
Home bakers selling through Swiggy, Zomato, or direct delivery
02002 - Retail Trade
Bakeries that only resell products manufactured elsewhere; rare for own-production bakeries
Source: CBDT Business Code List for AY 2026-27
A bakery that manufactures and sells bread, cakes, and biscuits should use 01099 in ITR-4 or ITR-3. A bakery with a cafe-style dine-in area can use 09002. Home bakers delivering through platforms use 10001.
The NIC codes for Udyam registration are different from ITR business codes: 10711 (manufacture of bread, rusk, and fresh bakery products), 10712 (manufacture of biscuits, cakes, pastries, rusks), and 10719 (other bakery products NEC).
Section 44AD Presumptive Taxation for Bakeries
Most bakery owners and home bakers with turnover up to Rs 2 crore (or Rs 3 crore if 95% or more of receipts and payments are non-cash) can use Section 44AD presumptive taxation. This eliminates the need for detailed books of accounts and audit.
Tax Rate Chart
Section 44AD Deemed Profit Rates for Bakeries
Minimum profit you must declare under presumptive taxation
Digital Receipts (UPI, Bank Transfer, Card)
UPI, NEFT, RTGS, credit and debit card, cheque, and demand draft receipts
Cash Receipts
Walk-in cash payments at bakery counter, cash on delivery for home bakers
Source: Section 44AD (Section 58, ITA 2025)
Example: Neighbourhood bakery with mixed receipts
A bakery earns Rs 40 lakh total turnover: Rs 28 lakh via UPI and card payments, and Rs 12 lakh in cash from counter sales.
- Digital portion: Rs 28,00,000 x 6% = Rs 1,68,000
- Cash portion: Rs 12,00,000 x 8% = Rs 96,000
- Total deemed profit: Rs 2,64,000
At this income level under the new tax regime, total tax after the Section 87A rebate would be nil (income below Rs 12 lakh standard deduction + rebate threshold).
Example: Home baker on Instagram
A home baker earns Rs 8 lakh from custom cake orders: Rs 7.5 lakh via UPI and Rs 50,000 in cash.
- Digital: Rs 7,50,000 x 6% = Rs 45,000
- Cash: Rs 50,000 x 8% = Rs 4,000
- Total deemed profit: Rs 49,000
Well below the basic exemption limit. File ITR-4 showing nil tax, but filing is still mandatory if turnover exceeds the basic exemption limit.
When Section 44AD does not apply
Tax Rate Chart
Section 44AD Exclusions for Bakery Owners
If any condition applies, you must maintain full books and file ITR-3
Turnover exceeds Rs 2 crore (cash > 5%)
Section 44AD limit; maintain full books of accounts
Turnover exceeds Rs 3 crore (cash within 5%)
Extended limit for predominantly digital bakeries
LLP (Limited Liability Partnership)
LLPs cannot use Section 44AD; must maintain full books
Opted out of 44AD and income above BEL
If you opted for 44AD then switched to regular, you cannot use 44AD for the next five years if your total income exceeds the basic exemption limit
Source: Section 44AD(4) and (5), Income Tax Act 1961
GST on Bakery Products
GST is the most critical compliance area for bakeries because different products attract different rates, and the GST 2.0 reforms (22 September 2025) changed rates on several categories.
GST rate structure for bakery products
Tax Rate Chart
GST Rates on Bakery Products (Post GST 2.0, 22 September 2025)
Rates depend on product type and packaging
Plain Bread (unbranded, unpackaged) - HSN 1905
Includes pav, roti, naan, and plain white or brown bread sold loose
Branded or Packaged Bread - HSN 1905
Pre-packaged bread with registered brand name
Cakes and Pastries - HSN 19059010
Reduced from 18% under GST 2.0; includes birthday cakes, muffins, cupcakes, pastries
Biscuits (plain) - HSN 1905
Reduced from 18% under GST 2.0; plain biscuits, cookies, and cream biscuits
Rusks and Toast - HSN 1905
All varieties including suji rusk and milk rusk
Pizza Base and Pizza Bread - HSN 1905
Reduced from 18% under GST 2.0; raw pizza bases for restaurants
Restaurant Service (dine-in or takeaway) - SAC 996331
If bakery serves food for consumption on premises or takeaway as a restaurant
Source: GST 2.0 notifications effective 22 September 2025; HSN Chapter 19
The GST 2.0 impact on bakeries
Before 22 September 2025, cakes, pastries, biscuits, and pizza bases attracted 18% GST with Input Tax Credit (ITC). After GST 2.0, these products moved to the 5% slab. This is a significant change:
- Price reduction opportunity: Bakeries can pass the 13 percentage point reduction to customers, increasing competitiveness
- ITC impact: At 5% GST, bakeries cannot claim ITC on inputs like flour, butter, sugar, and packaging materials. Bakeries with high input costs should calculate whether the 5% rate without ITC is more beneficial than the old 18% rate with ITC
- Composition scheme recalculation: Bakeries on the composition scheme at 1% (manufacturers) now face a smaller gap between composition and regular rates
GST registration threshold
GST registration is mandatory when annual turnover exceeds Rs 20 lakh (Rs 10 lakh in special category states). Home bakers below this threshold need not register unless they sell through e-commerce platforms like Swiggy or Zomato, which may trigger mandatory registration under the e-commerce operator provisions.
GST Composition Scheme for Bakeries
Bakeries with turnover up to Rs 1.5 crore can opt for the GST Composition Scheme, which simplifies GST compliance. The rate depends on how your bakery operates:
Tax Rate Chart
GST Composition Scheme Rates for Bakeries
Choose based on your primary business activity
Manufacturer (packaged goods only)
CGST 0.5% + SGST 0.5%; for bakeries producing and selling packaged bread, biscuits, cakes for wholesale or retail without dine-in
Restaurant or Eatery (dine-in or takeaway)
For bakery cafes, cake shops with counter service, bakeries serving food for on-premises consumption
Trader (reselling bakery products)
For shops that buy and resell bakery products from other manufacturers
Source: Section 10, CGST Act 2017; GST Composition Scheme Rules
Manufacturer vs restaurant: which rate applies?
This is the most common GST confusion for bakeries. If your bakery only manufactures and sells packaged products (bread, biscuits, cakes in packaging), you qualify for the 1% manufacturer rate. If your bakery has a counter where customers buy and consume food (even takeaway from a display counter), the activity is treated as a restaurant service, and the 5% rate applies.
Most neighbourhood bakeries with a retail counter fall under the 5% restaurant category. Pure manufacturing bakeries supplying to hotels, supermarkets, and wholesale distributors qualify for the 1% rate.
Composition scheme restrictions
- No Input Tax Credit on purchases
- Cannot issue tax invoices (only bill of supply)
- Cannot make inter-state sales
- Cannot supply through e-commerce operators (Swiggy, Zomato)
- Must file quarterly returns (CMP-08) instead of monthly GSTR-1 and GSTR-3B
TDS Provisions for Bakery Owners
Two TDS sections are relevant for bakery businesses:
Section 194C: TDS on bulk supply contracts
When a company, hotel, institution, or any audit-liable entity engages a bakery for regular supply of bread, cakes, or other products under a contract, TDS under Section 194C (Section 393, ITA 2025) applies:
Tax Rate Chart
TDS Rates on Bakery Supply Contracts (Section 194C)
Applicable when single payment exceeds Rs 30,000 or aggregate exceeds Rs 1 lakh in a year
Payment to Individual or HUF Bakery Owner
Proprietorship bakeries; most small bakeries
Payment to Company, Firm, or Other Entity
Partnership firms, companies running bakery chains
No PAN Furnished
Higher rate under Section 206AA if bakery owner does not provide PAN
Source: Section 194C (Section 393, ITA 2025)
Example: A hotel orders bread and pastries worth Rs 60,000 per month from a bakery (proprietorship). Since the single monthly payment exceeds Rs 30,000, the hotel deducts TDS at 1%: Rs 600 per month. This TDS appears in your Form 26AS and AIS.
Section 194-O: TDS on Swiggy and Zomato sales
If your bakery or home baking business sells through Swiggy or Zomato, the platform deducts TDS at 0.1% on gross sales above Rs 5 lakh in a financial year under Section 194-O.
Tax Rate Chart
TDS on Bakery Sales Through E-Commerce Platforms
Platform deducts TDS before settlement
Gross sales above Rs 5 lakh on Swiggy or Zomato
Deducted on gross order value, not net settlement; appears in AIS
No PAN furnished to platform
Higher rate if PAN is not linked to platform account
Source: Section 194-O (Section 393, ITA 2025)
Home bakers on both Swiggy and Zomato must declare gross sales from both platforms in their ITR. The combined TDS data appears in a single AIS entry per PAN. Under-reporting is immediately visible.
30% disallowance for non-deduction
If your bakery is subject to tax audit and you fail to deduct TDS on payments to contractors, suppliers, or landlords, Section 40(a)(ia) (Section 21(d), ITA 2025) disallows 30% of that expense. A bakery paying Rs 3 lakh annual rent without deducting TDS on the portion above Rs 6 lakh per year loses the deduction for 30% of the excess amount.
FSSAI Registration for Bakeries
FSSAI registration is mandatory for all food businesses in India under the Food Safety and Standards Act, 2006. Operating a bakery without FSSAI registration attracts fines up to Rs 5 lakh and potential imprisonment.
Tax Rate Chart
FSSAI License Tiers for Bakeries
Select the tier based on your annual turnover
Basic Registration (Form A)
Turnover up to Rs 12 lakh; covers home bakers, small neighbourhood bakeries; register on FoSCoS portal
State License (Form B)
Turnover Rs 12 lakh to Rs 20 crore; requires physical premises inspection; processing 30 to 60 days
Central License
Turnover above Rs 20 crore or operating in multiple states; large bakery chains and franchise operations
Source: FSSAI (Food Safety and Standards Authority of India)
FSSAI for home bakers
Home bakers need at minimum the basic FSSAI registration (Form A). The process takes under 30 minutes on the FoSCoS portal (foscos.fssai.gov.in). Documents required: Aadhaar card, passport-size photograph, proof of address, and a self-declaration of food safety practices. You can register for up to 5 years at Rs 500 (avoiding annual renewals).
FSSAI as a tax-deductible expense
FSSAI registration fees, annual renewal fees, and any costs incurred for food safety compliance (testing, training, labelling) are fully deductible business expenses. Deduct them in your profit and loss account if filing ITR-3. Under Section 44AD presumptive taxation, these expenses are already deemed included in the 6% or 8% profit rate.
Home Baker Tax Obligations
Home bakers face the same tax laws as commercial bakeries. There is no separate "cottage food" exemption in Indian tax law.
Key rules for home bakers
Step-by-Step Guide
Tax Compliance Checklist for Home Bakers
Register with FSSAI
Track All Income
Get GST Registration When Required
File ITR-4 Using Section 44AD
Pay Advance Tax If Applicable
Declare Swiggy and Zomato TDS
Instagram and social media income
Income from Instagram orders, WhatsApp orders, and direct delivery is taxable even if you do not have a shop or GST registration. The Income Tax Act taxes all business income regardless of how it is received. UPI payments are tracked through your bank account and appear in the Annual Information Statement (AIS). Not reporting this income while having large UPI inflows creates a mismatch that the tax department's automated systems flag.
Platform commissions and deductions
If you sell through Swiggy or Zomato, your gross order value and net settlement are different amounts. For ITR purposes under Section 44AD, declare the gross order value as your turnover (before platform commissions, delivery charges, and TDS). The platform commission is a business expense already deemed covered by the 6% or 8% presumptive rate.
Deductible Business Expenses
If you maintain full books of accounts and file ITR-3 (not using Section 44AD), the following expenses are deductible:
Tax Rate Chart
Common Deductible Expenses for Bakeries
Only applicable when filing ITR-3 with actual profit computation; not available under 44AD
Raw Materials
Flour (maida, atta, sooji), sugar, butter, eggs, cream, chocolate, dry fruits, yeast, baking powder
Rent (Shop, Kitchen, or Cold Storage)
Shop rent, cold storage rent, commissary rent; TDS under 194-I on rent above Rs 6 lakh per year
Employee Salaries and Wages
Bakers, counter staff, delivery persons, cleaning staff; TDS under 192 on salary
Electricity and Gas
Major expense for bakeries; commercial electricity rates apply for shop premises
Packaging Materials
Boxes, bags, wrapping paper, cake boards, tin foils, labels
Delivery and Transport
Fuel for delivery vehicle, courier charges, Dunzo or Porter delivery fees
FSSAI Fees and Food Testing
Registration fees, renewal, lab testing, hygiene training
Equipment Maintenance and Repairs
Oven servicing, mixer repair, refrigerator maintenance
Platform Commissions (Swiggy, Zomato)
25% to 35% of order value; deduct as selling expense
Marketing and Advertising
Instagram ads, Google ads, Zomato promoted listings, signage, flyers
Source: Sections 30 to 37, Income Tax Act 1961
Depreciation on Bakery Equipment
Bakery businesses invest significantly in equipment. Depreciation is allowed on assets used for the business under the Written Down Value (WDV) method:
Tax Rate Chart
Depreciation Rates for Bakery Assets
Written Down Value (WDV) method; applicable only when filing ITR-3
Ovens (Commercial, Deck, Convection)
Plant and machinery; includes gas and electric ovens
Mixers, Dough Kneaders, Sheeters
Plant and machinery; planetary mixers, spiral mixers
Refrigerators and Display Coolers
Walk-in coolers, display refrigerators, deep freezers
Delivery Vehicles
Two-wheelers at 15%; higher rate of 30% for commercial vehicles (goods carriages)
Furniture and Fixtures
Display counters, shelving, tables, chairs for cafe area
Computers and POS Systems
Billing software, POS terminals, laptops used for business
Source: Income Tax Rules, Schedule II; Companies Act 2013 Schedule II (for reference)
Home bakers using personal kitchen equipment for business can claim depreciation on the business-use portion. If an oven costing Rs 50,000 is used 70% for business, depreciation applies on Rs 35,000 at 15% WDV.
ITR Form Selection for Bakery Owners
Comparison
ITR Form Comparison for Bakery Businesses
| Parameter | ||
|---|---|---|
For a detailed comparison of when to choose which form, see our ITR-2 vs ITR-3 vs ITR-4 guide.
When ITR-3 is better than ITR-4
If your bakery has high expenses (rent above Rs 3 lakh per year, staff salary, equipment purchases) and your actual profit margin is below 6% to 8%, filing ITR-3 with actual books may result in lower tax. However, you must maintain complete books and may need a tax audit if turnover exceeds Rs 1 crore. Once you opt out of 44AD, you cannot re-enter for the next five years if your total income exceeds the basic exemption limit.
Advance Tax for Bakery Owners
If your total tax liability for the year exceeds Rs 10,000 (after TDS credit), you must pay advance tax. Failure to pay triggers interest under Section 234B and 234C.
Tax Rate Chart
Advance Tax Schedule for Bakery Owners
Due dates and percentages for FY 2025-26
Section 44AD Users (Presumptive)
Single instalment; no quarterly payments needed under presumptive taxation
ITR-3 Filers: 15 June 2025
First instalment
ITR-3 Filers: 15 September 2025
Second instalment
ITR-3 Filers: 15 December 2025
Third instalment
ITR-3 Filers: 15 March 2026
Final instalment
Source: Section 211 (Section 167, ITA 2025); Section 44AD(4)
Income Tax Act 2025 Section Mapping
From FY 2026-27, the Income Tax Act 2025 replaces the 1961 Act. Key sections for bakery owners with their new numbers:
Comparison
ITA 2025 Section Mapping for Bakery Owners
| Parameter | ||
|---|---|---|
For a complete mapping of all sections, see our ITA 2025 section mapping guide.
Common Mistakes Bakery Owners Make
Step-by-Step Guide
8 Tax Mistakes Bakery Owners Should Avoid
Not registering with FSSAI
Ignoring GST composition scheme choice
Not tracking Swiggy and Zomato gross sales
Mixing personal and business bank accounts
Claiming Section 44ADA instead of 44AD
Missing TDS credit from bulk orders
Not paying advance tax under 44AD
Using wrong GST rate on cakes and pastries
Pre-Filing Checklist for AY 2026-27
Deadline Timeline
ITR Filing Checklist for Bakery Owners
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