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What is Section 44ADA?
Section 44ADA is the presumptive taxation scheme specifically for professionals. It allows them to:
- Declare 50% of gross receipts as taxable income (presumed)
- No need to maintain detailed books of accounts
- No tax audit required (even if receipts cross ₹1 cr)
- File ITR-4 SUGAM (simpler form)
Designed for self-employed professionals working independently. Huge compliance reduction vs regular books.
Eligible professions
Section 44AA(1) defines 'specified profession' for 44ADA:
- Legal — Lawyers, advocates
- Medical — Doctors, dentists, surgeons, physiotherapists
- Engineering — Engineers, architects, consultant engineers
- Accountancy — Chartered Accountants, Cost Accountants, Company Secretaries
- Technical consultancy — IT consultants, management consultants
- Interior decoration — Interior designers
- Film/TV/sports — Actors, directors, writers, athletes
- Authorised representatives — Tax consultants registered with respective regulator
- Any other profession notified by CBDT
Turnover limit (FY 2026-27)
Gross receipts up to ₹75 lakh in the FY (extended from ₹50 lakh; check current notification).
Note: The extension to ₹75 lakh comes with a condition — at least 95% of receipts must be in non-cash mode (banking channels, UPI, digital). Otherwise, ₹50 lakh limit applies.
Above ₹75 lakh: Cannot use 44ADA. Must maintain books and undergo tax audit u/s 44AB.
How presumed income works
Example: Dr. Sharma is a doctor with ₹40 lakh gross receipts in FY 2026-27.
- Presumed income under 44ADA: 50% × ₹40 lakh = ₹20 lakh
- Tax on ₹20 lakh (slabs): ~₹3.5-4 lakh (in old regime; lower in new)
- If actual expenses were ₹30 lakh, actual income would be only ₹10 lakh — but you declare ₹20 lakh under presumptive
- Conversely, if actual expenses were ₹10 lakh, actual income would be ₹30 lakh — but you declare ₹20 lakh, saving tax on ₹10 lakh
Net effect: Most professionals find 44ADA significantly beneficial because actual expenses are usually less than 50% of receipts.
Conditions and restrictions
- Cannot opt and unopt every year — Must commit for at least 5 consecutive years OR be excluded for next 5 years
- Cannot claim depreciation separately — Deemed to have been claimed
- Cannot carry forward losses from profession (since no loss exists in presumed scheme)
- Salary/dividend/interest are independent of 44ADA
- Cannot use for non-profession businesses — Trading, manufacturing don't qualify even if you're a professional