A freelance designer billing Rs 40 lakh a year can declare just Rs 20 lakh as taxable income, keep no formal account books, skip a costly audit, and file the one-page ITR-4 Sugam, all because section 44ADA lets professionals offer a flat 50 percent of receipts as income. This is presumptive taxation, the legal shortcut built for small businesses and self-employed professionals who do not want the burden of full bookkeeping.
Quick answer. Under section 44AD a resident individual, HUF or partnership firm with business turnover up to Rs 2 crore (Rs 3 crore if cash receipts stay within 5 percent) declares 8 percent of turnover as profit, or 6 percent on digital receipts. Under section 44ADA a specified resident professional with gross receipts up to Rs 50 lakh (Rs 75 lakh if cash stays within 5 percent) declares 50 percent of receipts as income. You file ITR-4 Sugam and pay all advance tax in one instalment by 15 March.
Presumptive taxation lets eligible small businesses and professionals pay income tax on a fixed, assumed percentage of turnover or receipts instead of computing actual profit from audited accounts. It removes the duty to maintain detailed books and, in most cases, the need for a tax audit, reducing both paperwork and compliance cost sharply.
Section 44AD covers eligible resident assessees carrying on business: an individual, a Hindu Undivided Family, or a partnership firm (but not a Limited Liability Partnership). The deemed profit is 8 percent of total turnover or gross receipts, reduced to 6 percent for the part received through cheque, bank transfer, UPI or other electronic modes. The turnover ceiling is Rs 2 crore, raised to Rs 3 crore from FY 2023-24 where cash receipts do not exceed 5 percent of total turnover. The scheme does not apply to a person earning income from a profession covered by section 44ADA, from commission or brokerage, or from an agency business.
Section 44ADA covers specified resident professionals: legal, medical, engineering, architectural, accountancy, technical consultancy and interior decoration professionals, and others notified under section 44AA. The deemed income is 50 percent of gross receipts. The ceiling is Rs 50 lakh, raised to Rs 75 lakh from FY 2023-24 where cash receipts do not exceed 5 percent.
The deemed rates are floors, not ceilings. You may declare higher income if actual profit is more. But once you adopt presumptive income you cannot claim any further deduction for business expenses or depreciation under sections 30 to 38, because those are treated as already allowed inside the deemed figure. The authority is the Income Tax Department under the Central Board of Direct Taxes, and returns are filed at incometax.gov.in.
Worked example. Kashvi Pathak is a freelance UX consultant in Pune for FY 2025-26. Her gross receipts are Rs 48 lakh, all received by bank transfer, so she is within the Rs 50 lakh limit and uses section 44ADA.
Deemed income = 50 percent of Rs 48 lakh = Rs 24 lakh.
She has no other income. On Rs 24 lakh she keeps no formal books and needs no audit. She pays the whole advance tax in one instalment by 15 March, files ITR-4 Sugam, and e-verifies. Her laptop and software costs cannot be claimed separately, because the 50 percent figure already accounts for expenses.
RTI cannot file your return or cut your tax. But if an intimation, refund or grievance involving the Income Tax Department stalls, you can ask its Central Public Information Officer for records or a status update under the Right to Information Act, 2005. Use it for things like the processing status of a return, a copy of an intimation under section 143(1), or the action taken on a refund grievance.
To, The Central Public Information Officer, Income Tax Department, [your assessing ward or CPC], Subject: Request for information under section 6(1) of the RTI Act, 2005 1. Present status of processing of my income tax return for AY 2026-27, PAN [XXXXX]. 2. A copy of any intimation issued under section 143(1) for the said return. 3. Action taken and current status of my refund grievance dated [date], if any. Kindly provide the above within 30 days as required under section 7(1). If any part is held by another public authority, transfer it under the Act. I enclose the application fee. Place: Date: Signature
If you get no reply within 30 days or an unsatisfactory one, you may file a first appeal under section 19(1) to the First Appellate Authority. The AI RTI Drafter and the First Appeal Builder help you draft both.
A resident individual, HUF or partnership firm running an eligible business with turnover up to Rs 2 crore, or up to Rs 3 crore where cash receipts do not exceed 5 percent. LLPs, companies, professionals, and commission, brokerage or agency earners cannot use it.
A resident professional in a specified field such as legal, medical, engineering, architecture, accountancy, technical consultancy or interior decoration, with gross receipts up to Rs 50 lakh, or up to Rs 75 lakh where cash receipts do not exceed 5 percent.
If the freelancer carries on a notified profession, they must use 44ADA. A freelancer in a non-professional business activity within the limits may use 44AD. The nature of the work, not the label, decides which section applies.
Yes, if your tax liability after TDS is Rs 10,000 or more. The benefit is that you pay the entire advance tax in one instalment by 15 March, instead of four instalments through the year.
No. The deemed rate already factors in expenses and depreciation, so no further deduction under sections 30 to 38 is allowed against presumptive income.
If you opt into 44AD and later declare profit below 8 percent or 6 percent, you cannot use 44AD for the next 5 assessment years, and if your income exceeds the basic exemption you must keep books and get a tax audit. This applies only to 44AD, not 44ADA.
ITR-4 Sugam is the prescribed form for presumptive income under 44AD and 44ADA, provided your other income also fits the Sugam conditions.
RTI cannot order a refund, but you can ask the CPIO for the status and action taken on a refund grievance, which often prompts movement. Pursue the refund through the grievance and rectification channels as well.