Presumptive taxation under 44AD and 44ADA

Updated 11 October 2026

Presumptive taxation lets small businesses and professionals pay tax on a fixed share of their turnover instead of keeping full accounts and getting an audit. A business can declare 8% of turnover as profit (6% for digital receipts) if turnover is up to ₹2 crore, or ₹3 crore when cash receipts are 5% or less. A professional can declare 50% of receipts up to ₹50 lakh, or ₹75 lakh with the same cash condition.

Old sections, new section

The schemes were sections 44AD (business), 44ADA (professionals) and 44AE (goods vehicles) of the 1961 Act. The Income-tax Act, 2025 merges all three into section 58 from tax year 2026-27. The limits and rates are the same, and most people still call them by the old names.

44AD: small businesses

• Who: resident individuals, HUFs and partnership firms (not LLPs or companies) running a business. Not for commission or brokerage income, agency business, the professions covered by 44ADA, or goods-vehicle operators, who use 44AE.
• Turnover limit: ₹2 crore, or ₹3 crore if cash receipts are no more than 5% of turnover.
• Deemed profit: 8% of turnover received in cash; 6% of turnover received by bank transfer, UPI, card or account-payee cheque, if received by the return due date. You may declare more.
• Lock-in: if you opt in and then leave the scheme within the next five years, you cannot come back for five years after that, and you must keep books and get an audit if your income is above the basic exemption limit.

44ADA: professionals

• Who: resident individuals and partnership firms (not LLPs) in the listed professions: legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, company secretaries, film artists, authorised representatives, and other notified professions such as information technology.
• Receipts limit: ₹50 lakh, or ₹75 lakh if cash receipts are no more than 5%.
• Deemed income: 50% of gross receipts. You may declare more.

Many software developers and consultants fall under technical consultancy or information technology. If your work is not on the list, 44ADA does not apply, and you should check with a tax professional whether 44AD fits your case.

44AE: goods vehicles

Owners of up to 10 goods vehicles can declare ₹1,000 per tonne of gross vehicle weight per month for each heavy goods vehicle (above 12,000 kg), and ₹7,500 per month for each other goods vehicle, for the months they own it.

What you get, and what you give up

• No tax audit and simple records, as long as you declare at least the deemed profit.
• One advance tax payment: under 44AD and 44ADA you may pay your whole advance tax by 15 March instead of in four instalments.
• Simple return: ITR-4 (Sugam) if your total income is up to ₹50 lakh; otherwise ITR-3. The due date is 31 August, since these are non-audit cases (see ITR due dates).
• No separate expense claims: rent, salaries, depreciation and other costs are treated as already covered by the deemed rate.
• Both regimes allowed: in the old regime you can still claim 80C and other deductions against the deemed income. In the new regime, resident individuals get the rebate if total income is up to ₹12 lakh.

Presumptive taxation is only about income tax. Whether you need GST registration depends on your turnover and is a separate question; see GST for freelancers.

If your real profit is lower

You can declare less than the deemed rate, but then you must keep proper books of account and, if your income is above the basic exemption limit, get a tax audit. That brings an earlier due date (31 October) and audit fees, which is why most small businesses and freelancers stay with the deemed rate. Compare your tax both ways with the income tax calculator.