The presumptive taxation scheme under the Income Tax Act 2025 allows small businesses and professionals to declare income at a prescribed percentage of turnover/gross receipts without maintaining detailed books of account. This significantly reduces compliance burden. Three sections — 44AD, 44ADA, and 44AE — cover different taxpayer categories.
Section 44AD — Small Businesses
Who is eligible?
- Resident individuals, HUFs, and partnership firms (not LLPs)
- Engaged in any business (excluding specified professions, agency business, or commissions)
- Turnover ≤ Rs. 3 crore (if cash receipts ≤ 5% of turnover; otherwise limit is Rs. 2 crore)
Deemed Income
- 8% of turnover (cash receipts portion)
- 6% of turnover (digital/banking receipts portion)
Benefits
- No books of account required
- No tax audit required
- Advance tax payable as single instalment by 15 March
Restrictions
- If opted for 5 consecutive years: if opted out in year 6, cannot re-opt for 5 years
- No further deductions from the presumptive income (no depreciation, salary, etc.)
- Losses not allowed to be carried forward if 44AD is opted
Section 44ADA — Professionals
Who is eligible?
- Resident individuals and partnership firms engaged in specified professions
- Specified professions: Legal, Medical, Engineering, Architecture, Accountancy, Technical Consultancy, Interior Decoration, and CBDT-notified professions
- Gross receipts ≤ Rs. 75 lakh (if cash receipts ≤ 5%; else Rs. 50 lakh)
Deemed Income
50% of gross receipts is treated as taxable income. The professional need not justify actual expenses.
Benefits and Restrictions
- Similar to 44AD — no detailed books, no audit
- Advance tax as single instalment by 15 March
- No deduction for actual expenses except the 50% already presumed
Section 44AE — Transporters (Goods Carriages)
Applicable to taxpayers owning up to 10 goods carriages at any time during the Tax Year. Deemed income per vehicle per month:
| Type of Vehicle | Deemed Income/Month |
|---|---|
| Heavy goods vehicle (> 12 MT) | Rs. 1,000 per ton of gross vehicle weight |
| Other goods vehicle | Rs. 7,500 per vehicle per month |
Comparison Table: 44AD vs 44ADA
| Feature | Section 44AD | Section 44ADA |
|---|---|---|
| Applicability | Small businesses | Specified professionals |
| Turnover limit | Rs. 3 crore (digital) | Rs. 75 lakh (digital) |
| Deemed income % | 6% (digital) / 8% (cash) | 50% of gross receipts |
| LLP eligibility | No | Yes (firm only) |
| Books of accounts | Not required | Not required |
| ITR form | ITR-4 (Sugam) | ITR-4 (Sugam) |
When Should You NOT Choose Presumptive Taxation?
- When actual profit is below the prescribed percentage (losses or thin margins)
- When significant capital expenditure/depreciation makes actual computation beneficial
- When carrying forward business losses from prior years
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Frequently Asked Questions
What is the turnover limit under Section 44AD for Tax Year 2026-27?
Rs. 3 crore if 95% or more receipts are via digital/banking modes. Otherwise, the limit is Rs. 2 crore.
Can an LLP opt for Section 44AD presumptive taxation?
No. Section 44AD is available only to individuals, HUFs, and partnership firms (not LLPs). LLPs must maintain regular books of account.
What is the deemed income percentage under Section 44ADA?
50% of gross receipts is treated as taxable income for specified professionals under Section 44ADA.
Can a doctor opt for Section 44ADA?
Yes, provided gross receipts do not exceed Rs. 75 lakh (if digital receipts ≥ 95%) or Rs. 50 lakh otherwise. Medical profession is specifically listed under 44ADA.
What happens if a taxpayer opts out of Section 44AD after 3 years?
If a taxpayer opts for 44AD for fewer than 5 consecutive years and then opts out, they cannot re-opt for 44AD for the next 5 years.
Can presumptive scheme taxpayers claim depreciation separately?
No. Under presumptive schemes, no deductions are available beyond the prescribed percentage. Depreciation is implicitly included in the presumed income computation.
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