What is Presumptive Taxation?

How it works

Under Section 44AD, businesses declare 8% (6% digital) of turnover up to Rs.3 crore; under 44ADA, professionals declare 50% of receipts up to Rs.75 lakh (where cash is within 5%).

The three schemes side by side

Section 44AD (small businesses): turnover up to Rs.2 crore (Rs.3 crore where cash receipts ≤ 5%), deemed income 8% of turnover (6% for digital receipts). Section 44ADA (specified professionals): gross receipts up to Rs.50 lakh (Rs.75 lakh with the same cash test), deemed income 50%. Section 44AE (goods transporters, up to 10 vehicles): fixed per-vehicle-per-month income. All three: no books under 44AA (subject to conditions), no audit, single advance-tax instalment by 15 March.

Worked example

A boutique consultancy (individual) bills Rs.60,00,000, 98% digital. Under 44ADA (within the Rs.75 lakh enhanced limit), deemed income = Rs.30,00,000, taxed at slab rates; actual expenses are irrelevant. If real expenses run 60% of receipts, regular books would show only Rs.24,00,000 of income — presumptive would overtax by Rs.6,00,000 of income; the regime is an election, so compute both before opting.

The traps

44AD's five-year lock-out on exit (44AD(4)) with mandatory audit in the lock-out years where income exceeds the exemption; declaring the floor while AIS shows inconsistent gross flows; firms forgetting that partner remuneration is not deductible from presumptive income; and professionals mixing 44AD and 44ADA receipts without separating business from profession. From 1 April 2026 the schemes continue as Sections 58/59 of the Income-tax Act 2025 with unchanged percentages.

This content is for general guidance only and does not constitute professional advice. Tax law changes frequently — verify the current position and consult a qualified Chartered Accountant before acting. Last reviewed: June 2026.