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Who is this guide for? If you own a beauty salon, hair salon, barber shop, beauty parlour, spa, nail studio, or work as a freelance beautician, makeup artist, or hair stylist earning income from beauty services in India, this guide covers your complete income tax obligations for AY 2026-27 (FY 2025-26): how your income is classified, why Section 44AD (not 44ADA) applies, which ITR form to file, TDS on rent and staff payments, equipment depreciation, GST at 5% without ITC, and deductible business expenses.
India has lakhs of beauty salons, parlours, and barber shops, making it one of the largest service sectors by establishment count. Despite this scale, most salon owners file taxes without understanding the rules specific to their industry: beauty services are classified as business income (not professional income), cash-heavy operations affect audit thresholds, and the September 2025 GST rate cut from 18% to 5% changed the economics of every salon in the country.
This guide covers every tax obligation a salon owner or beautician faces, from income classification to TDS on rent, equipment depreciation, GST compliance, and ITR filing. If you are in a related service profession, see also our guides for gym trainers and fitness instructors, event managers and wedding planners, photographers and videographers, and freelancer consultants.
How Salon Owners and Beauticians Earn Income
Beauty service income comes from multiple streams, often within the same salon:
Tax Rate Chart
Common Revenue Streams for Salon Businesses
Typical ranges; actual revenue varies by location, clientele, and services offered
Haircuts and Styling
Highest volume; walk-in and appointment-based
Hair Colouring and Treatment
Higher ticket size; includes keratin, smoothening, rebonding
Bridal and Party Makeup
Seasonal peak during wedding season (Oct-Feb)
Facial, Skin Care, and Spa Services
Repeat clients; upselling opportunity
Manicure, Pedicure, Nail Art
SAC 999722; growing segment
Beauty Product Sales (Retail)
GST 18% or 28% as goods, not 5% service rate
Source: Industry estimates based on salon marketplaces and Tax Garden client data (FY 2025-26)
A salon with 20 to 30 clients per day at an average ticket of Rs 500 earns Rs 10,000 to Rs 15,000 daily, translating to Rs 30 lakh to Rs 45 lakh annually. Add bridal makeup bookings, product sales, and spa services, and annual revenue can range from Rs 5 lakh for a single-chair parlour to Rs 2 crore or more for a multi-branch salon.
Income Classification: Business, Not Profession
This is the most critical distinction for salon owners. It determines which presumptive scheme applies, which ITR form you file, and how your expenses are treated.
Salon owners, beauticians, hairdressers, makeup artists, nail technicians: Business income
Beauty services are classified as Profits and Gains of Business or Profession under the business head. They are not a "specified profession" under Section 44AA (Section 62 under ITA 2025). The specified professions are: legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, authorised representative, company secretary, information technology, and film artist.
Beauty and salon services do not appear in this list. You use Section 44AD (Section 58, ITA 2025), not Section 44ADA.
The "cosmetology is medical" trap
A common misconception: salon owners who offer skin treatments, laser hair removal, or aesthetic procedures sometimes classify their income as "medical profession" to use Section 44ADA at 50% deemed profit. This is incorrect unless the salon is operated by a registered medical practitioner (MBBS, BDS, or equivalent) performing medical procedures. A beautician or aesthetician with a diploma in cosmetology is not a medical professional under Section 44AA. Misclassification triggers scrutiny and reassessment.
Interior decoration distinction
Interior decoration is a specified profession under Section 44AA. If a salon also provides interior design consultancy as a separate billable service (not interior decoration of the salon premises for own use), that portion of income may qualify under Section 44ADA. In practice, this applies to virtually no salon owners.
Presumptive Taxation Under Section 44AD
Most salon owners benefit from Section 44AD because the deemed profit rates are far lower than actual margins. Under Section 44AD (now Section 58 of the Income Tax Act 2025):
Tax Rate Chart
Deemed Profit Rates Under Section 44AD (Section 58, ITA 2025)
Beauty salon business income
Digital Receipts (UPI, Bank Transfer, NEFT, RTGS)
Payment received via account-payee cheque, bank draft, or electronic mode
Cash Receipts
Cash payments and non-account-payee cheques
Source: Section 58(2), Table Sl. No. 1, Income Tax Act 2025
Eligibility conditions
- You must be an individual, HUF, or partnership firm (not LLP).
- Your total turnover must not exceed Rs 2 crore in the financial year. If cash receipts are 5% or less of total turnover, the limit increases to Rs 3 crore.
- Your business must not be commission, brokerage, or agency. Running a salon is none of these, so you are eligible.
Why cash percentage matters for salons
Salons are one of the most cash-intensive service businesses in India. Walk-in customers frequently pay in cash, especially in Tier 2 and Tier 3 cities. If your cash receipts exceed 5% of total turnover, two things happen:
- The Section 44AD turnover threshold drops from Rs 3 crore to Rs 2 crore.
- The tax audit threshold drops from Rs 10 crore to Rs 1 crore.
If your salon earns Rs 1.5 crore with 20% cash receipts, you are within Section 44AD limits (below Rs 2 crore) but your audit threshold is Rs 1 crore, which you have crossed. You will need a tax audit even while using presumptive taxation. Encouraging UPI and card payments directly reduces your compliance burden.
Worked example
A beauty salon in a Tier 2 city earns Rs 24 lakh in FY 2025-26. Of this, Rs 18 lakh comes via UPI and card payments, and Rs 6 lakh is received in cash. Cash is 25% of turnover (above 5%).
| Component | Amount | Rate | Deemed profit |
|---|---|---|---|
| Digital receipts | Rs 18,00,000 | 6% | Rs 1,08,000 |
| Cash receipts | Rs 6,00,000 | 8% | Rs 48,000 |
| Total deemed profit | Rs 1,56,000 |
Under the new tax regime, with a basic exemption of Rs 4 lakh, this income is below the exemption limit. No income tax is payable. Compare this to actual salon margins of 30% to 50%: Section 44AD deems only 6% to 8% as profit, making it significantly more tax-efficient.
The five-year lock-in
Under Section 58(7), if you opt for Section 44AD and then opt out (declare profit below the deemed rate or file under regular provisions) within five subsequent years, you lose eligibility for Section 44AD for the next five assessment years. Additionally, you must maintain full books of accounts and get them audited if your income exceeds the basic exemption limit in the opt-out year.
TDS Obligations for Salon Owners
Salon owners face TDS obligations from multiple directions: as payers of rent, as payers of staff and freelancers, and as recipients of payments from corporate clients.
TDS on salon rent: Section 194-I
Tax Rate Chart
TDS on Rent for Salon Premises
Section 194-I (Section 393(1) Sl.6(vi), ITA 2025)
Rent for Land or Building
Threshold: annual rent exceeds Rs 2,40,000; covers salon shop rent
Rent for Machinery or Equipment
Equipment leasing for salon chairs, hair wash stations, etc.
Without PAN of Landlord
Section 206AA; always collect PAN from landlord
Source: Section 393(1) Sl.6(vi), Income Tax Act 2025
If you pay more than Rs 2,40,000 per year as rent for your salon premises (which most commercial salons do), you must:
- Obtain a TAN (Tax Deduction and Collection Account Number).
- Deduct TDS at 10% from each rent payment.
- Deposit TDS with the government by the 7th of the following month.
- File quarterly TDS return (Form 140, formerly Form 26Q).
- Issue Form 131 (TDS certificate, formerly Form 16A) to the landlord.
Non-deduction penalty: If you fail to deduct TDS on rent, 30% of the rent expense is disallowed under Section 40(a)(ia) (Section 21(d), ITA 2025). On a rent of Rs 5 lakh per year, this means Rs 1,50,000 of your rent expense cannot be deducted from income, even if you paid the full rent.
TDS on freelance beautician payments: Section 194C
If your salon hires freelance makeup artists, bridal specialists, or contract hairstylists for specific bookings, payments to them may attract TDS under Section 194C (Section 393(1) Sl.6(i), ITA 2025):
Tax Rate Chart
TDS on Contractor and Freelancer Payments
Section 194C (Section 393(1) Sl.6(i), ITA 2025)
Individual/HUF Freelancers
Threshold: Rs 30,000 single payment or Rs 1,00,000 aggregate in FY
Firm/Company Contractors
Same thresholds; applies to staffing agencies supplying beauticians
Source: Section 393(1) Sl.6(i), Income Tax Act 2025
TDS on professional services: Section 194J
If you engage a dermatologist, skin specialist, or certified cosmetologist (with medical qualification) for specific treatments at your salon, their fees may fall under Section 194J at 10% (threshold: Rs 50,000 per year). The distinction: beauticians providing execution-based services fall under 194C; medical professionals providing clinical judgment fall under 194J.
Under ITA 2025, Section 194J maps to Section 393(1) Sl.6(iii).
TDS received from corporate clients
Corporate clients (hotels, event companies, film production houses) who engage your salon for bulk bookings may deduct TDS on your invoices under Section 194C at 1% or 2%. Verify all TDS credits in Form 26AS and AIS before filing your ITR. If excess TDS is deducted, claim the refund through your return.
Equipment Depreciation
If you maintain full books of accounts (not using Section 44AD), you can claim depreciation on your salon equipment under the Written Down Value (WDV) method:
Tax Rate Chart
Depreciation Rates for Salon Equipment
WDV method under Section 33, ITA 2025 (previously Section 32)
Salon Chairs, Hair Wash Stations, Dryers
Plant and machinery (general); includes steamers, autoclaves, UV sterilisers
Furniture and Fixtures
Reception counters, display shelves, waiting area furniture, mirrors
Computers, POS Systems, Billing Software Hardware
Higher rate for computer hardware including tablets used for booking
Air Conditioners, Water Heaters, Generators
Plant and machinery; essential salon infrastructure
Motor Vehicle (for home service visits)
If used partly for personal purposes, restrict to business-use proportion
Source: Appendix I to Income Tax Rules (as applicable under ITA 2025); See full depreciation guide
The 180-day rule
If an asset is put to use for less than 180 days in the year of purchase, you can claim only half the normal depreciation rate. A salon chair bought on 1 January gets half-year depreciation (7.5% instead of 15%) for that financial year.
Depreciation under Section 44AD
If you use Section 44AD presumptive taxation, depreciation is deemed to have been allowed (Section 58(6)). You cannot claim it as a separate deduction. However, the asset's WDV still reduces each year for the purpose of computing future depreciation if you later switch to regular provisions.
For detailed WDV calculation methods and block-of-assets rules, see the depreciation on business assets guide.
Deductible Business Expenses
If you do not use Section 44AD (or if your actual expenses push profit below the deemed rate and you choose to maintain books), you can deduct the following against your salon income:
Rent and premises: Shop rent, electricity, water, maintenance charges, property insurance, interior renovation (amortised over useful life if capital in nature).
Products and consumables: Shampoo, conditioner, hair dye, wax, facial creams, nail polish, disposable items (gloves, capes, towels), sanitisation products.
Employee costs: Salaries and wages for staff beauticians, receptionist, cleaners. PF and ESI contributions if applicable. Bonus payments. Training and certification expenses for staff skill upgrades.
Freelancer and contractor payments: Fees paid to freelance makeup artists, bridal specialists, visiting dermatologists. Remember TDS obligations on these payments.
Technology and software: Salon management software (Zenoti, MioSalon, JENIUS), POS system, appointment booking platform, website hosting, social media advertising tools.
Marketing and business development: Google Ads, Instagram and Facebook advertising, printed brochures, salon signage, loyalty programme costs, beauty exhibition stall fees.
Insurance: Shop insurance, employee group health insurance, professional liability insurance.
Financial costs: Bank charges, payment gateway fees (Razorpay, PhonePe business), interest on business loans for salon setup or expansion.
Laundry: Towel and cape washing, dry cleaning of uniforms.
All expenses must have supporting invoices or receipts. Personal expenses (a family member's beauty treatment billed as salon expense) will be disallowed on scrutiny.
GST on Salon Services: The 5% Regime
From September 22, 2025, beauty salon services attract 5% GST without Input Tax Credit (ITC). This was reduced from 18% by the 56th GST Council meeting.
Tax Rate Chart
GST on Salon Services: Current Rates
Effective September 22, 2025
Hair and Beauty Services (SAC 999721)
No ITC; covers haircuts, styling, colouring, treatments
Cosmetic Treatment, Manicure, Pedicure (SAC 999722)
No ITC; includes nail art, waxing, threading
Other Beauty Services (SAC 999729)
No ITC; spa, facial, body treatments, tattoo, piercing
Beauty Product Sales (Standalone)
Sale of goods taxed separately; ITC available under regular scheme
Source: 56th GST Council Meeting; Notification No. 11/2017-CT(R) as amended by GST 2.0 rate revision
The ITC trade-off
Under the old 18% regime, salons could claim ITC on GST paid for rent, equipment, products, and other business inputs. Under the 5% regime, ITC is blocked. GST you pay on salon chairs, hair dryers, beauty products purchased for salon use, rent, and electricity becomes an embedded cost.
For a salon spending Rs 4 lakh annually on taxable inputs at 18% GST, the lost ITC is Rs 72,000 per year. However, the rate reduction from 18% to 5% on service revenue of Rs 20 lakh saves the salon's clients Rs 2,60,000 in GST, which typically translates to competitive pricing advantage. Most salons benefit from the lower rate despite losing ITC.
Product vs service distinction
When a salon sells beauty products (shampoo bottles, skincare sets, makeup kits) as standalone retail products, these are goods, not services. They attract 18% or 28% GST depending on the product's HSN classification, not the 5% service rate. The salon must maintain separate billing for product sales and service charges.
When products are used as part of a service (hair dye used during a colouring service), this is a composite supply where the principal supply is the service. The entire amount attracts 5% GST.
For detailed GST rules for salons, see the GST on beauty salon and spa services guide.
GST registration threshold
GST registration is mandatory once your aggregate turnover crosses Rs 20 lakh in a financial year (Rs 10 lakh in Manipur, Mizoram, Nagaland, Tripura, Meghalaya, Arunachal Pradesh, Sikkim, and Uttarakhand). Below this threshold, you are not required to register, charge, or collect GST.
For the registration process, see the GST registration guide.
Books of Accounts and Tax Audit
Books of accounts: Section 44AA (Section 62, ITA 2025)
If you do not use Section 44AD, maintaining books of accounts is mandatory when:
- Your income from the salon exceeds Rs 1,20,000 in any of the three preceding years, OR
- Your gross receipts exceed Rs 10,00,000 in any of the three preceding years.
Books must include a cash book, a journal (if mercantile system), a ledger, copies of invoices issued, and original bills and receipts for expenses. Retain all records for six years from the end of the relevant assessment year.
Penalty for non-maintenance: Rs 25,000 under Section 271A.
If you use Section 44AD and declare income at or above the deemed profit rate, you are not required to maintain books.
Tax audit: Section 44AB (Section 63, ITA 2025)
Tax Rate Chart
Tax Audit Thresholds for Salon Owners
When audit under Section 63 becomes mandatory
Cash Transactions > 5% of Turnover
Audit mandatory if gross receipts exceed Rs 1 crore; critical for cash-heavy salons
Cash Transactions ≤ 5% of Turnover
Higher threshold for predominantly digital payments
Section 44AD Opt-Out
Audit required in the year you opt out of presumptive scheme
Source: Section 63, Income Tax Act 2025; Section 58(8)
Salons are particularly vulnerable to the Rs 1 crore threshold because of high cash volumes. A salon earning Rs 1.2 crore with 15% cash receipts crosses the audit threshold and must get accounts audited. The same salon with cash below 5% would only need audit above Rs 10 crore.
For more on tax audit requirements and Form 3CD, see the Section 44AB tax audit guide.
Advance Tax
Under Section 44AD
If you use Section 44AD, you pay 100% of your advance tax in a single installment by 15 March of the financial year. The quarterly installments (June 15, September 15, December 15) do not apply.
If you miss the March 15 deadline, interest under Section 234C applies at 1% per month on the shortfall.
Without Section 44AD
If you maintain regular books and do not use presumptive taxation, advance tax is payable in four quarterly installments:
| Installment | Due date | Cumulative % |
|---|---|---|
| First | 15 June | 15% |
| Second | 15 September | 45% |
| Third | 15 December | 75% |
| Fourth | 15 March | 100% |
For complete advance tax due dates and calculation, see the advance tax due dates guide.
Old Regime vs New Regime
The new tax regime is the default for AY 2026-27. For salon owners:
New regime usually wins when: Your salon is your primary income source, you use Section 44AD with low deemed profit, and you do not have major deductions under 80C, 80D, or home loan interest. The lower slab rates and Rs 4 lakh basic exemption make the new regime favourable for most salon owners.
Old regime may win when: You maintain full books, claim heavy equipment depreciation and high rent expenses, deduct Section 80C (up to Rs 1.5 lakh), Section 80D health insurance (up to Rs 75,000 for self and parents), home loan interest under Section 24(b), and your actual expenses significantly reduce taxable income below what the new regime offers.
Most salon owners using Section 44AD will find the new regime more beneficial because the deemed profit is already so low (6% to 8%) that there is little taxable income left to reduce with deductions.
ITR Form Selection
Tax Rate Chart
ITR Form for Salon Owners: AY 2026-27
Choose based on your income type and scheme
ITR-4 (Sugam)
Presumptive taxation; total income up to Rs 50 lakh; no brought-forward losses
ITR-3
Full books of accounts; claim actual expenses and depreciation
Source: CBDT ITR Form notifications for AY 2026-27
ITR-4 checklist for salon owners
- Select "Business" (not Profession) as income type.
- Enter business code 21001 (Hair Dressing and Other Beauty Treatment).
- Enter gross receipts and the deemed profit (6% of digital + 8% of cash).
- Report TDS credits from Form 26AS and AIS (especially TDS on rent paid, which appears as a credit for your landlord, not for you; and TDS received from corporate clients, which is your credit).
- If you have salary income from another job alongside the salon, ITR-4 can handle both.
When to use ITR-3
- Your gross receipts exceed the Section 44AD threshold (Rs 2 crore / Rs 3 crore).
- You want to claim actual expenses and depreciation to reduce profit below the 6% to 8% deemed rate (but beware the five-year lock-in consequence).
- You have brought-forward business losses to set off.
- Your total income exceeds Rs 50 lakh.
For a detailed comparison, see the ITR-2 vs ITR-3 vs ITR-4 comparison guide and the ITR-4 Sugam filing guide.
Freelance Beauticians and Home-Service Professionals
Not all beauticians operate from a salon. A growing segment provides home-service beauty treatments through platforms like Urban Company, Yes Madam, and Housejoy, or through direct client bookings.
Income classification
Home-service beauticians are also classified as business income under Section 44AD. The same rules apply: 6% deemed profit on digital receipts, 8% on cash.
Platform commission
If you work through Urban Company or similar platforms, the platform deducts its commission (typically 20% to 30%) before crediting your account. Your gross receipts for Section 44AD purposes are your share after commission, not the amount the client paid to the platform. The platform's TDS (if any) appears in your Form 26AS.
GST for home-service beauticians
If your aggregate turnover from all services is below Rs 20 lakh, you do not need GST registration. Most individual home-service beauticians fall below this threshold. If you cross it, the 5% GST without ITC rate applies.
Expenses specific to home-service
Travel expenses (fuel, cab fares, two-wheeler maintenance), portable equipment (makeup kits, hair tools, trolley bags), and mobile phone charges used for client bookings are deductible if you maintain books instead of using Section 44AD.
ITA 2025 Section Mapping for Salon Owners
From 1 April 2026, the Income Tax Act 2025 replaces the 1961 Act. Key section numbers salon owners need to know:
Tax Rate Chart
Old vs New Section Numbers (ITA 2025)
Sections relevant to salon owners
Section 44AD: Presumptive (Business)
Section 58(2), Table Sl. No. 1
Section 44ADA: Presumptive (Profession)
Section 58(2), Table Sl. No. 3; NOT applicable to salons
Section 44AA: Books of Accounts
Same requirements under new number
Section 44AB: Tax Audit
Thresholds unchanged
Section 194-I: TDS on Rent
10% for building; threshold Rs 2,40,000 annual
Section 194C: TDS on Contracts
1% individual / 2% others
Section 40(a)(ia): Non-deduction Disallowance
30% disallowance for non-deduction of TDS
Source: Income Tax Act 2025; CBDT concordance table; see full mapping guide
For the complete section mapping, see the old vs new income tax sections 2026 mapping guide.
Seven Common Tax Mistakes Salon Owners Make
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Classifying salon income as "Profession" instead of "Business." Beauty services are not a specified profession. Filing under the wrong head can trigger a defective return notice and reassessment.
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Using Section 44ADA instead of Section 44AD. Only specified professionals qualify for 44ADA. Using the wrong scheme means declaring 50% profit instead of 6% to 8%, resulting in significantly higher tax for no benefit.
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Not deducting TDS on rent. If your annual salon rent exceeds Rs 2,40,000, TDS at 10% is mandatory. Non-deduction results in 30% disallowance of the entire rent expense under Section 21(d).
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Ignoring cash percentage for audit thresholds. Salons with high cash volumes cross the Rs 1 crore audit threshold much sooner than digital-first businesses. Track your cash-to-total ratio every quarter.
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Mixing product sales and service GST rates. Selling a shampoo bottle is a goods sale at 18%, not a service at 5%. Incorrect classification on GST invoices attracts notices from the GST department.
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Overlooking the five-year lock-in. Switching out of Section 44AD before five years locks you out of the scheme and triggers mandatory audit. Plan the switch carefully.
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Not claiming TDS credits from corporate clients. Hotels, event companies, and production houses deduct TDS on your invoices. If you do not verify Form 26AS and claim these credits in your ITR, you pay tax twice on the same income.
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Sources
This guide is verified against the Income Tax Act 2025 as enacted and the Finance Act 2026. Key facts cross-checked against multiple authoritative sources:
- Beauty salon NOT a specified profession: confirmed via CBDT notification list (legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, authorised representative, company secretary, information technology, film artist); beauty services absent from this list; confirmed via CAClubIndia forum discussions, Quora expert answers, and cashahnawaz.com ITR filing guide for beauty and wellness businesses
- Section 44AD eligibility for salon business, deemed profit rates (6% digital / 8% cash), turnover limits (Rs 2 Cr / Rs 3 Cr), and five-year lock-in: confirmed via incometaxindia.gov.in, ClearTax, CAClubIndia, TaxGuru, and TaxGarden's own Section 44AD guide
- Section 44ADA NOT available to beauticians: confirmed via Section 44AA specified profession list; salon services not in any notified category
- Business code 21001 (Hair Dressing and Other Beauty Treatment): confirmed via CAClubIndia, ClearTax business code list, Quicko, Aditya Birla Capital, and TaxGarden's business code guide
- TDS on rent Section 194-I threshold Rs 2,40,000, rate 10% for buildings: confirmed via ClearTax, eshnakumar.com, IndiaFilings
- TDS 194C rates 1% individual / 2% others, thresholds Rs 30,000 single / Rs 1,00,000 annual: confirmed via TaxGarden's TDS on contractor payments guide
- Section 194J threshold Rs 50,000 and rate 10% for professional services: confirmed via Tax2win, CanaraHSBC, BajajFinserv, CAClubIndia
- 30% disallowance under Section 40(a)(ia) / Section 21(d) for non-deduction of TDS: confirmed via TaxScan, Corpbiz, TaxGuru
- GST 5% without ITC on salon services from September 22, 2025: confirmed via 56th GST Council FAQs (pib.gov.in), MioSalon, Invoay, Salon360app, TaxClue, TaxHandout, and TaxGarden's own GST on beauty salon guide
- SAC codes 999721, 999722, 999729 for beauty services: confirmed via IndiaFilings, CAClubIndia, CharteredHelp, Dingg, GSTInvoices
- Depreciation 15% WDV for plant and machinery (salon equipment), 10% furniture, 40% computers: confirmed via Appendix I to Income Tax Rules, ClearTax depreciation guide, and TaxGarden's depreciation guide
- Section 44AA maps to Section 62, Section 44AB maps to Section 63, Section 194-I maps to Section 393(1) Sl.6(vi) under ITA 2025: confirmed via TaxGarden existing blog corpus and CBDT concordance table
- Tax audit thresholds Rs 1 Cr (cash >5%) / Rs 10 Cr (cash ≤5%): confirmed via ClearTax, TaxGuru, TaxGarden's tax audit guide
- Books of accounts income threshold Rs 1,20,000 / turnover threshold Rs 10,00,000 and penalty Rs 25,000 under Section 271A: confirmed via incometaxindia.gov.in, CAClubIndia
- Advance tax single installment for Section 44AD by March 15: confirmed via ClearTax, TaxGuru, TaxGarden's advance tax guide
