Presumptive taxation
Small businesses and professionals who want the simplest compliant way to be taxed, and need to know which scheme applies to them.
Presumptive taxation lets you declare a fixed percentage of turnover as income, with no detailed books or audit within the limits, a huge simplification for the self-employed. The scheme you use depends on what you do. Section 44AD covers most businesses (a deemed 6% of digital receipts or 8% of other receipts, up to Rs 3 crore where cash is 5% or less). Section 44ADA covers the specified professions only (50% of receipts, up to Rs 75 lakh). Section 44AE covers goods carriages (a flat amount per vehicle). The single most common error is a trade or coach being pushed onto 44ADA at 50% when they are a business that belongs in 44AD at 6 or 8%.
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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 →
Guides in this hub
- Section 44AD for businesses →
Deemed 6/8% of turnover for most businesses
- Section 44ADA for professions →
50% of receipts for the specified professions only
- Section 44AE for goods carriages →
Flat per-vehicle scheme for transporters
- Opting in, opting out and the 5-year lock →
The 44AD(4) lock-out and how to switch
- Books and audit thresholds →
When you must keep books or get a tax audit
Business vs profession is the key question
44AD (business) and 44ADA (profession) are not interchangeable. A trade, coaching, fitness, photography, design, a food business, is a business on 44AD at 6 or 8%. Only the specified professions under Section 44AA(1) (legal, medical, engineering, architecture, accountancy, technical consultancy and a few more) use 44ADA at 50%. A client deducting 194J TDS does not make you a professional.
Digital payment lifts your limit
Keeping cash receipts to 5% or less of turnover lets a 44AD business use the higher Rs 3 crore limit and the lower 6% deemed-profit rate (instead of 8%), and lets a 44ADA professional use the Rs 75 lakh limit instead of Rs 50 lakh. Taking payment digitally is both a compliance and a tax advantage.
Calculators for this topic
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