Presumptive taxation (44AD and 44ADA)
What Presumptive taxation (44AD and 44ADA) means, where you will meet it and what it means for your business.
DefinitionPresumptive taxation lets small businesses declare 8% of turnover (6% if digital) under Section 44AD, and professionals 50% of receipts under 44ADA, as taxable profit without maintaining audited books.
Section 44AD applies to resident individuals, HUFs and partnership firms (not LLPs) with business turnover up to ₹2 crore, or ₹3 crore if at least 95% of receipts are digital. Section 44ADA applies to specified professionals such as doctors, lawyers, architects, engineers, accountants and consultants with receipts up to ₹50 lakh, or ₹75 lakh with 95% digital receipts. You declare the presumptive percentage as profit, pay tax on it at slab rates, file ITR-4 and skip books and audit. You can declare a higher profit if you wish; declaring lower means keeping books and getting audited. You meet it as a freelancer or small trader from your first return. What it means for you: advance tax is a single instalment by 15 March, and opting out of 44AD locks you out for five years.
Where you will meet this term
- Income Tax Planning & FilingSalaried people, investors, NRIs, freelancers and business owners who want the return right, not just filed.from ₹999
- ProprietorshipFor a freelancer, consultant or single-owner shop that wants to start trading this week with the lightest compliance.from ₹999
- Partnership FirmFor two or more people starting a small trading, family or services business with the simplest possible setup.from ₹2,999