Section 44ADA: Presumptive Taxation for Professionals
Section 44ADA of the Income-tax Act, 1961 provided a simplified method for eligible resident professionals to calculate taxable professional profits at 50% of gross receipts, or a higher amount claimed to have been earned, without separately computing routine deductible expenses.
Tax-year note (updated October 2026): The Income-tax Act, 2025 applies from 1 April 2026. Section 44ADA below is explained as a provision of the Income-tax Act, 1961 for years governed by that Act. For tax year 2026-27 onward, consult the applicable provisions and rules of the 2025 Act rather than assuming old section numbers continue unchanged.
What is Section 44ADA?
Section 44ADA is a presumptive taxation provision: instead of deducting each actual professional expense from gross receipts, an eligible taxpayer may declare professional income at the statutory percentage. It was introduced with effect from 1 April 2017 to simplify compliance for specified professions.
Gross receipts generally refer to amounts received or receivable from carrying on the profession, determined consistently with the applicable tax and accounting rules. Presumptive income is the amount deemed to be taxable business or professional profit under the special provision.
Who is eligible under Section 44ADA?
Under the amended 1961 Act provision, the scheme applies to a resident individual or resident partnership firm other than a limited liability partnership (LLP) engaged in a profession referred to in Section 44AA(1). The earlier uploaded statutory extract predates later changes to the definition of eligible taxpayers.
Section 44AA(1) includes the professions of law, medicine, engineering, architecture, accountancy, technical consultancy and interior decoration, as well as professions notified by the Central Board of Direct Taxes (CBDT), subject to the scope of applicable notifications.
Companies, LLPs and non-residents do not qualify under this specific presumptive scheme. A business ordinarily covered by Section 44AD should not be confused with a profession covered by Section 44ADA.
Gross-receipts limit: Rs. 50 lakh or Rs. 75 lakh
| Condition | Maximum gross receipts |
|---|---|
| General ceiling | Rs. 50 lakh |
| Cash receipts do not exceed 5% of total gross receipts | Rs. 75 lakh |
The enhanced Rs. 75 lakh threshold was introduced by the Finance Act, 2023. For the 5% test, a cheque or bank draft that is not account-payee is treated as cash. The enhanced limit is conditional; it does not automatically apply to every professional.
How is presumptive professional income calculated?
Example 1: A qualifying resident architect has gross professional receipts of Rs. 40 lakh. Presumptive income at 50% is Rs. 20 lakh.
Example 2: A qualifying professional has gross receipts of Rs. 70 lakh, with cash receipts of Rs. 2 lakh (about 2.86%). The receipts satisfy the 5% cash condition, so the enhanced ceiling may apply; presumptive income at 50% is Rs. 35 lakh.
These are illustrations of income computation, not final tax payable. Other income, deductions outside the deemed professional-expense computation and the relevant tax regime may affect the tax calculation.
Section 44ADA explained subsection by subsection
Section 44ADA(1): Deemed professional profits
Eligible professional profits are deemed to be 50% of qualifying gross receipts, or a higher amount claimed to have been earned. This special method overrides the ordinary computation rules in Sections 28 to 43C to the extent stated in the provision.
Section 44ADA(2): No separate expense deduction
Deductions under Sections 30 to 38, including ordinary business expenses and depreciation, are treated as already allowed in calculating the presumptive income. They cannot be deducted again from the 50% amount.
Section 44ADA(3): Written-down value of assets
For tax depreciation purposes, the written-down value is computed as though allowable depreciation had been claimed and granted for each relevant year.
Section 44ADA(4): Lower income declaration
Where a taxpayer claims professional income below the presumptive amount and total income exceeds the maximum amount not chargeable to income tax, the provision requires maintenance of books under Section 44AA and an audit report under Section 44AB, for the relevant years governed by this law.
Books of account, tax audit and return filing
Section 44AA addresses the maintenance of books. Section 44AB governs tax audit requirements. The return form and filing deadline depend on the taxpayer's circumstances and the governing tax year; consult the official income-tax e-filing portal for the correct form and due date.
Professionals should maintain evidence of receipts, bank statements, tax invoices and other records required under tax, GST or professional regulation even when presumptive taxation simplifies income-tax profit computation.
Section 44ADA compared with Section 44AD
| Section 44ADA | Section 44AD |
|---|---|
| Specified eligible professions | Specified eligible businesses |
| 50% presumptive profit | Generally 8%, or 6% for qualifying receipts |
| General Rs. 50 lakh / conditional Rs. 75 lakh limit | General Rs. 2 crore / conditional Rs. 3 crore limit |
Frequently asked questions
Who can use Section 44ADA?
Resident individuals and partnership firms other than LLPs carrying on professions referred to in Section 44AA(1), subject to the applicable gross-receipts ceiling.
What is the presumptive profit rate?
Ordinarily 50% of eligible professional gross receipts, or a higher amount claimed to have been earned.
When does the Rs. 75 lakh limit apply?
The enhanced Rs. 75 lakh ceiling applies where cash receipts do not exceed 5% of total gross receipts; non-account-payee cheques or drafts are treated as cash for this test.
Can expenses be deducted again?
No. Deductions under Sections 30 to 38 are treated as already allowed in arriving at presumptive income.
Is tax audit required if profit is below 50%?
For the relevant 1961 Act years, Section 44ADA(4) requires books and audit where lower profit is claimed and total income exceeds the basic exemption limit. Check the tax year and governing legislation.
Official legislation and guidance
- Income Tax Department: legislation, circulars and guidance
- India Code: official central legislation
- Income Tax e-Filing Portal: returns and compliance
- Income-tax Act, 1961: official Act resource
Original page: statutory extract and amendment note
The following text is retained from the uploaded original page for historical reference. It reflects an earlier version of the provision and should not be relied on for later statutory amendments.
View original Section 44ADA extract
1(1) Notwithstanding anything contained in sections 28 to 43C, in the case of an assessee, being a resident in India, who is engaged in a profession referred to in sub-section (1) of section 44AAand whose total gross receipts do not exceed fifty lakh rupees in a previous year, a sum equal to fifty per cent. of the total gross receipts of the assessee in the previous year on account of such profession or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the assessee, shall be deemed to be the profits and gains of such profession chargeable to tax under the head Profits and gains of business or profession.
(2) Any deduction allowable under the provisions of sections 30 to 38shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed.
(3) The written down value of any asset used for the purposes of profession shall be deemed to have been calculated as if the assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.
(4) Notwithstanding anything contained in the foregoing provisions of this
section, an assessee who claims that his profits and gains from the profession
are lower than the profits and gains specified in sub-section (1) and whose
total income exceeds the maximum amount which is not chargeable to income-tax,
shall be required to keep and maintain such books of account and other documents
as required under sub-section (1) of section 44AA and get them audited and
furnish a report of such audit as required under section 44AB.
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1. Ins. by s. 27, ibid. (w.e.f. 1-4-2017).
General information only. Check the law, notifications and filing guidance applicable to your tax year before taking a tax position.