Presumptive taxation readiness checklist

Presumptive taxation is the simplest way for a small business or professional to be taxed, but using the wrong scheme (or breaching a limit) is a common, costly error. This checklist confirms whether you are a business (44AD, 6 or 8%) or a specified profession (44ADA, 50%), checks the turnover limits and the cash condition, and flags the five-year lock-out before you opt out.

Last reviewed: 29 May 2026

Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact Income Tax Department. Read our editorial scope →

What it contains

A checklist covering business-vs-profession classification, the turnover and cash limits, the digital-receipt advantage, and the opt-out lock-out warning.

How to use it

Classify first

Get the business-vs-profession question right before anything else, declaring 50% under 44ADA when you are a 44AD business overpays substantially.

Go digital

Taking payment digitally lowers your deemed profit from 8% to 6% and lifts the turnover limit, the single best move for a presumptive taxpayer.

Treat opt-out as a 5-year decision (44AD)

If you are a 44AD business, declaring below the deemed profit locks you out of presumptive taxation for five years, so model it before doing it.

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PRESUMPTIVE TAXATION (44AD/44ADA) - READINESS CHECKLIST

  STEP 1 - Which scheme are you?
  [ ] Am I a SPECIFIED PROFESSION under Section 44AA(1)? (legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, CS, authorised representative, film artist, IT)
  -> YES = 44ADA (50% of receipts)
  -> NO (trade, coaching, retail, food, consulting, commission...) = 44AD (6/8%) as a BUSINESS
  [ ] Reminder: a client deducting 194J TDS does NOT make me a profession
  [ ] Commission/brokerage and insurance-agency income: NEITHER scheme (keep books)

  STEP 2 - Am I within the limits?
  [ ] 44AD business: turnover up to Rs 2 crore (Rs 3 crore if cash receipts <=5%)
  [ ] 44ADA profession: receipts up to Rs 75 lakh (cash <=5%) else Rs 50 lakh
  [ ] LLPs and companies CANNOT use 44AD (44AD is for individuals, HUFs, partnership firms)

  STEP 3 - Maximise the benefit:
  [ ] Take receipts digitally (UPI/bank/card) -> 6% not 8% on 44AD, and unlocks the higher Rs 3 crore limit
  [ ] Keep cash receipts to 5% or less of turnover

  STEP 4 - Before you OPT OUT (declare below the deemed profit):
  [ ] 44AD businesses: opting out triggers a FIVE-YEAR lock-out + books + audit (Section 44AD(4))
  [ ] 44ADA professionals: NO lock-out - you can opt in/out year to year freely

  STEP 5 - File:
  [ ] Use ITR-4 (Sugam) if total income <= Rs 50 lakh and you are an eligible individual/HUF/firm
  [ ] Pay advance tax in a SINGLE instalment by 15 March