Section 44AD — Presumptive Taxation for Business (Tax Year 2026-27)

Updated: 3 June 2026 | Income-tax Act, 2025 | Turnover up to ₹3 Crore | ITR-4

Section 44AD allows small businesses to declare 8% of turnover as profit (6% if all receipts/payments are digital) — without maintaining detailed books of accounts. Applicable for businesses with turnover up to ₹3 crore. File ITR-4 (Sugam). Covers trading, retail, manufacturing, and most business activities — except professionals and those covered by other 44-series sections.

8% / 6%

Presumed profit: 8% of turnover (6% for 100% digital transactions).
No books of accounts required. No audit required. File ITR-4 with presumptive income. Turnover limit: ₹3 crore.

Presumptive Taxation Comparison — 44AD vs 44ADA vs 44AE

Section	Applies to	Turnover / Receipts Limit	Presumed Profit Rate
44AD	Business (trading, mfg, services)	₹3 Cr (₹2 Cr if cash >5%)	8% (6% digital)
44ADA	Specified professionals (doctor, CA, lawyer, engineer, architect)	₹75 lakh	50% of gross receipts
44AE	Goods transport operators (not owning >10 vehicles)	Per vehicle per month	₹1,000/ton/month (heavy) or ₹7,500/month (other)

Who Can Use Section 44AD?

Individual, HUF, or Partnership Firm (not LLP) engaged in eligible business
Resident in India
Gross turnover / total receipts ≤ ₹3 crore (if cash ≤ 5%); ≤ ₹2 crore (if cash > 5%)
Not covered under any other section (44AE, 44AF, 44B, 44BB, etc.)
Not carrying on profession (use 44ADA for professionals)
Has not claimed deductions under sections 10A, 10AA, 10B, etc.

Benefits of Section 44AD

No need to maintain books of accounts
No tax audit (even if turnover > ₹1 crore) — as long as you declare 8%/6%
Simpler ITR-4 (Sugam) instead of ITR-3
Can declare higher profit voluntarily (no cap on upside)
Advance tax: pay entire amount in one installment by 15 March

Example: A trader with ₹80 lakh annual turnover (all digital) declares 6% = ₹4.8 lakh as income. After ₹75K standard deduction (if applicable) and Chapter VI-A deductions, pays tax on the balance.

Frequently Asked Questions

What is the turnover limit for Section 44AD in 2026-27?

Section 44AD applies to businesses with aggregate turnover up to ₹3 crore (if cash receipts/payments are within 5% of total — otherwise ₹2 crore limit). Professionals use Section 44ADA (gross receipts up to ₹75 lakh). Under 44AD, 8% of turnover (6% for digital transactions) is presumed as profit.

What is the presumptive income rate under 44AD?

Presumed profit = 8% of gross turnover for cash businesses, or 6% for digital transactions (receipts/payments via banking channels). You can declare higher income voluntarily. Tax is paid on this presumed profit — no need to maintain detailed books of accounts.

Can I opt out of Section 44AD after opting in?

Yes, but with consequences. If you opt in under 44AD for a year and later opt out within 5 years, you cannot re-enter 44AD for the next 5 years. During the opt-out period, you must maintain books and get tax audit done if income exceeds basic exemption.

Does Section 44AD apply to professionals?

No. Section 44AD covers businesses (trading, manufacturing, services). Professionals (doctors, lawyers, CAs, engineers, architects, interior designers, technical consultants) use Section 44ADA instead, with a gross receipts limit of ₹75 lakh and 50% presumed profit.

What deductions are allowed under Section 44AD?

Under 44AD, ALL expenses (office rent, salaries, depreciation, etc.) are deemed included in the 8%/6% rate. No separate deduction is allowed except: deduction under Chapter VI-A (80C, 80D etc.), remuneration to partners (Section 40(b)), and interest to partners. Depreciation is deemed to have been allowed — WDV reduced accordingly.

Income Tax Slabs 2026-27 ITR Filing Due Date Income Tax Calculator Old vs New Regime How to File ITR Advance Tax Calculator

◆ Available in 71 Cities

Section 44ad Near You

Expert CA/CS assistance for section 44ad across India. Click your city for local details.

→ New Delhi → Mumbai → Bengaluru (Bangalore) → Hyderabad → Chennai → Kolkata → Pune → Ahmedabad → Noida (UP) → Gurgaon (Gurugram) → Jaipur → Lucknow → Chandigarh → Surat → Kochi (Cochin) → Faridabad → Ghaziabad → Greater Noida → Panipat → Sonipat → Manesar (IMT) → Dharuhera → Mathura → Palwal → Agra → Kosi Kalan → Aligarh → Khair → Jewar (Noida International Airport) → Kanpur → Varanasi (Kashi) → Prayagraj (Allahabad) → Meerut → Bareilly → Moradabad → Gorakhpur → Firozabad → Saharanpur → Muzaffarnagar → Bulandshahr → Hapur → Karnal → Kurukshetra → Ambala → Hisar → Rohtak → Yamunanagar → Rewari → Bhiwani → Jodhpur → Udaipur → Kota → Ajmer → Bikaner → Ludhiana → Amritsar → Jalandhar → Patiala → Mohali (SAS Nagar) → Bathinda → Dehradun → Haridwar → Rudrapur → Shimla → Solan (Baddi-Barotiwala-Nalagarh) → Bhopal → Indore → Gwalior → Jammu → Srinagar → Panchkula

Ask Veda