Presumptive taxation schemes under Sections 44AD and 44ADA offer simplified compliance for small businesses and certain professionals by deeming a percentage of turnover or gross receipts as taxable profit.
Eligible assessees may avoid maintaining full books in many cases but must still file ITR and comply with GST and TDS laws. Opting out or declaring lower income triggers audit and higher compliance burden.
This article explains eligibility, deemed profit rates, and cautions.
Section 44AD — eligible business
- Resident individual, HUF, or partnership firm (not LLP) carrying on eligible business.
- Turnover or gross receipts do not exceed prescribed limit (₹3 crore with digital receipts threshold, subject to Finance Act limits — verify current year).
- Excluded: agency business, commission/brokerage, plying/leasing goods carriages (44AE applies).
Deemed profit
8% of turnover (or gross receipts) or 6% for digital receipts as defined. Assessee may declare higher income voluntarily.
Section 44ADA — professionals
- Resident professionals in specified list (legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, etc.).
- Gross receipts up to ₹75 lakh (with digital threshold) — verify notification.
- 50% of gross receipts deemed profit; higher income may be offered.
Comparison
| Section | Assessee | Deemed profit | Books / audit |
|---|---|---|---|
| 44AD | Eligible business | 6% / 8% | Simplified; audit if opt-out below slab |
| 44ADA | Specified professionals | 50% | Similar; 44AB if profit below 50% |
Advance tax and GST
Entire advance tax may be paid by 15 March if conditions under Section 44AD/44ADA met. GST registration and filing remain based on turnover thresholds independent of 44AD.
Opt-out and audit — Section 44AB
- If profit declared is lower than presumptive rate, books must be maintained and tax audit may apply if income exceeds basic exemption.
- Five-year lock-in: opting out of 44AD requires regular audit and computation for subsequent five years in specified cases.
- Partnership firms cannot use 44AD in some structures — verify entity type.
Practical cautions
- Actual expenses below deemed profit still require offering at least presumptive income.
- Reconcile turnover with GST GSTR-1 and 26AS for mismatch notices.
- Separate business lines may need split computation if one line is ineligible.
General professional information only. Turnover limits and rates change by Finance Act; verify before adopting presumptive scheme.