Income Tax for Chartered Accountants (CA) — 44ADA, GST & TDS Guide 2025-26

Section 44ADA — Presumptive Taxation for CAs

Section 44ADA of the Income-tax Act provides a presumptive income scheme for specified professionals. Chartered Accountants are explicitly listed as specified professionals under this section (along with doctors, lawyers, architects, engineers, and interior designers).

Eligibility: Individual CA or Hindu Undivided Family (HUF) with gross professional receipts ≤ ₹75 lakh in the financial year (limit enhanced from ₹50 lakh effective FY 2023-24).

How it works: Declare 50% of gross receipts as net income from the profession. The remaining 50% is deemed to cover all expenses — staff salaries, office rent, travel, professional subscriptions, technology, depreciation, etc. You do not need to substantiate or prove actual expenses.

Books of accounts: Not required if Section 44ADA is opted. No audit under Section 44AB is needed (as long as receipts ≤₹75 lakh).

Opting out: If your actual expenses exceed 50% of receipts and you want to declare lower income, you must maintain books of accounts and get them audited. You can opt out of 44ADA but then must stay out for the next 5 years.

When Must a CA Maintain Books and Get Audited?

A practising CA must maintain books of accounts and have them audited by another CA under Section 44AB in these situations:

Penalty for not getting audit done: 0.5% of gross receipts (minimum ₹1,500, maximum ₹1,50,000) or ₹1,50,000 — whichever is less — under Section 271B.

TDS Under Section 194J — 10% on CA Fees

Any company, firm, or individual/HUF whose accounts are required to be audited under Section 44AB must deduct TDS at 10% on professional fees paid to a Chartered Accountant. This is governed by Section 194J of the Income-tax Act.

Threshold: TDS is required when the fees paid (or credited) to a CA exceed ₹30,000 per financial year to a single CA. If total payments to a CA in a year are ≤₹30,000, no TDS is required.

TDS rate: 10% on gross professional fees. If the CA does not provide their PAN, TDS at 20% applies.

Form 26AS / AIS: All TDS deducted on a CA's fees by clients will appear in the CA's Form 26AS (Annual Information Statement). The CA can claim this TDS as a credit against their total income tax liability when filing ITR.

Technical services TDS (2%): If a CA provides purely technical services (e.g., IT system design, technical data analysis) as opposed to professional advisory services, the TDS rate under Section 194J may be 2% for that portion. Pure audit, tax filing, certification, and professional consulting fees are at 10%.

Partnership CA Firm — Tax at 30%

A partnership firm of Chartered Accountants (including LLP) is a separate taxpayer and is taxed at a flat rate of 30% on net taxable income. Key points:

Partners' remuneration: The firm can pay partners' remuneration and claim it as a deduction under Section 40(b) — subject to these limits:

Partners' interest: The firm can also pay interest to partners on their capital contribution — deductible up to 12% per annum under Section 40(b).

Partners' taxation: The remuneration and interest received by partners from the firm is taxable in the partners' individual hands at their personal slab rates (under the head "Profits and Gains of Business or Profession"). The partners' share of firm profit is exempt in their hands under Section 10(2A) to avoid double taxation.

Surcharge and cess: A partnership firm pays 12% surcharge if net income exceeds ₹1 crore, plus 4% Health and Education Cess on income tax + surcharge. Effective maximum tax rate for a firm: 34.944%.

Individual CA — Slab Rate Taxation

An individual CA practitioner is taxed at the applicable personal income tax slab rates. For FY 2025-26, under the new tax regime (default):

Under the old tax regime, an individual CA can claim Section 80C (₹1.5L), 80D, HRA, home loan interest (Section 24b), and other deductions to reduce taxable income. The decision between old and new regime depends on the CA's total deductions.

Rebate under Section 87A: Under the new tax regime, if total income ≤₹12 lakh, the full tax liability is rebated to zero (₹60,000 rebate). Under the old regime, the rebate is ₹12,500 for income ≤₹5 lakh.

GST for Practising CAs

CA services are classified as professional services under GST, taxable at 18% (CGST 9% + SGST 9% for intra-state, or IGST 18% for inter-state). Key GST obligations for CAs:

Mandatory GST registration threshold: ₹20 lakh aggregate annual turnover from professional services (₹10 lakh in special category states). If your total billing exceeds ₹20 lakh, GST registration is mandatory — irrespective of whether you opt for 44ADA or not.

Inter-state supply: If you provide services to a client in a different state (e.g., Mumbai CA filing ITR for a Delhi client), it is an inter-state supply and GST registration is mandatory regardless of turnover.

Invoicing: All CA invoices to GST-registered clients (businesses) must include GST registration number, HSN/SAC code for professional services (SAC 9982), CGST/SGST or IGST amount, and reverse charge applicability (if any).

Reverse Charge Mechanism (RCM): Services received from unregistered CAs by a registered business are subject to GST under RCM in certain cases. The recipient pays GST on behalf of the service provider.

Advance Tax for CAs

A CA with professional income must pay advance tax if the estimated income tax liability (after TDS) exceeds ₹10,000 in a financial year. Advance tax payment schedule:

Interest on shortfall: If advance tax is not paid on time or is short-paid, interest under Section 234B (1% per month on shortfall) and Section 234C (1% per month on instalments not paid on time) is levied.

TDS credit: TDS deducted by clients under Section 194J reduces your advance tax obligation. Net advance tax = Estimated total tax − TDS already deducted. If clients have deducted sufficient TDS, you may have minimal advance tax to pay.

CA Income — Complete Tax Scenario

Frequently Asked Questions

Related Pages