Section 44ADA – Presumptive Taxation Scheme for Professionals

💼 Section 44ADA – Presumptive Taxation Scheme for Professionals

If you’re a freelancer or a professional like a Chartered Accountant, lawyer, doctor, architect, or consultant—you know how tiring it is to maintain ledgers, journals, and statements for every rupee earned.

What if we told you that the Income Tax Department allows you to skip all of that?

Under Section 44ADA of the Income Tax Act, certain professionals can declare only 50% of their gross receipts as taxable income, without maintaining detailed books or getting accounts audited. This presumptive taxation scheme offers simplicity, legal compliance, and peace of mind.

✅ What Is Section 44ADA?

Section 44ADA is a special scheme introduced in Budget 2016, designed for small professionals with income up to ₹50 lakh. It allows them to declare a fixed percentage of gross receipts as income, and pay tax accordingly—without worrying about expenses or detailed bookkeeping.

This section is a game changer for:

• Freelancers
• Independent consultants
• Professionals with irregular billing
• Those with low expenses but high documentation needs

👩‍⚖️ Who Can Opt for Section 44ADA?

The presumptive scheme is available for resident individuals, Hindu Undivided Families (HUFs), and partnership firms (excluding LLPs) who engage in specified professions under Section 44AA(1), such as:

• Legal professionals (Advocates, lawyers)
• Chartered Accountants and Company Secretaries
• Doctors and medical practitioners
• Engineers and architects
• Technical consultants and IT professionals
• Interior decorators
• Film artists, authors, and other notified professionals

❗ LLPs and companies are not eligible for Section 44ADA.

💰 Income Declaration Rule

Under Section 44ADA:

• 50% of total gross receipts or professional fees is treated as presumptive income.
• You’re not required to maintain books of accounts under Section 44AA.
• You’re not required to get audit done under Section 44AB.
• The rest 50% is assumed to be your professional expenses.

💡 You can declare more than 50% as profit if you want. But if you declare less than 50%, you must maintain books and get audited if income exceeds ₹2.5 lakh.

📋 Key Conditions for Section 44ADA

🧮 Example of Presumptive Income

Let’s say:

• You are a self-employed graphic designer earning ₹40 lakh in FY 2023–24
• Under Section 44ADA, you declare 50% = ₹20 lakh as income
• You pay tax on ₹20 lakh as per the slab rate (old regime)

You don’t have to show rent bills, software costs, laptops, travel, etc. The department assumes 50% of your income goes toward expenses.

🧠 People Also Ask

❓ Is GST applicable if I opt for Section 44ADA?

Yes. GST and Income Tax are separate. Even if you opt for 44ADA, you must comply with GST if your turnover exceeds threshold limits.

❓ Can I claim additional deductions under 80C or 80D?

Yes. After computing presumptive income under 44ADA, you can still claim Chapter VI-A deductions like 80C, 80D, 80G, etc.

❓ Is TDS deducted under Section 194J still valid if I use 44ADA?

Yes. TDS under Section 194J (for professional services) is still deducted. But you can claim it as TDS credit in your ITR.

❓ Can I switch between 44ADA and normal scheme every year?

Yes. There is no lock-in period. You can opt in or out of Section 44ADA based on your yearly income and expenses.

⚠️ Common Mistakes to Avoid

• Claiming expenses separately (not allowed under 44ADA)
• Applying 44ADA under new tax regime (not permitted)
• Forgetting to claim TDS deducted by clients
• Choosing 44ADA without checking whether profession is notified
• Using it for trading income or other non-professional income

📌 Where to File in ITR

• Use ITR-4 (Sugam) for 44ADA income
• Declare gross receipts, and 50% as presumptive profit
• Mention profession code and nature of business
• Declare bank details, advance tax, and TDS

🎯 Final Thoughts from a CA’s Desk

“If you’re a professional with clean income and limited expenses, Section 44ADA is your best friend.”

It simplifies your life, saves time and money on compliance, and keeps you within legal limits. But it must be applied correctly—especially in terms of eligibility, return type, and regime selection.

📞 Need Help Opting for Section 44ADA or Filing ITR as a Professional?

At CallmyCA, we help:

• Check if your profession is eligible under 44ADA
• Calculate tax liability and advance tax
• File accurate ITR using ITR-4 with presumptive scheme
• Avoid audit, book-keeping, and penalty risks

👉 Click here to book your professional ITR filing via CallmyCA