Income tax · Business and professionals
Who can opt for presumptive tax under sections 44AD, 44ADA and 44AE, and what are the limits?
Short answer
Small businesses with turnover up to ₹2 crore (₹3 crore if cash receipts are within 5%) can declare 8% of turnover as income, or 6% of digital receipts (section 44AD). Specified professionals with receipts up to ₹50 lakh (₹75 lakh if cash is within 5%) declare 50% (section 44ADA). Owners of up to 10 goods vehicles declare a fixed amount a vehicle a month (section 44AE). No books or audit are needed. Under the 2025 Act all three are in section 58.
The three schemes
| 44AD (business) | 44ADA (profession) | 44AE (goods vehicles) | |
|---|---|---|---|
| Who | Resident individuals, HUFs and partnership firms (not LLPs) | Resident individuals and firms in specified professions: legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, film artists, and others notified | Anyone owning not more than 10 goods carriages at any time in the year |
| Limit | Turnover up to ₹2 crore, or ₹3 crore if cash receipts are not more than 5% | Gross receipts up to ₹50 lakh, or ₹75 lakh if cash receipts are not more than 5% | — |
| Income declared | 8% of turnover, 6% of receipts by bank or digital means (or more) | 50% of receipts (or more) | Heavy vehicles: ₹1,000 per tonne of gross vehicle weight a month; others: ₹7,500 a month per vehicle |
| Not for | Commission or brokerage agents, agency business, and the professions under 44ADA | — | — |
What you gain
- No books of account need be kept for the business, and no tax audit.
- Advance tax for 44AD and 44ADA is paid in one instalment by 15 March.
- File ITR-4 (Sugam) if total income is up to ₹50 lakh; ITR-3 otherwise.
No further deduction is allowed against the presumptive income for expenses, depreciation or, in the case of a firm, partners' salary and interest.
The five-year lock in 44AD
If you opt for 44AD and then, within the next five years, declare income below the presumptive rate, you cannot use 44AD for the following five years. In that case, if your income exceeds the basic exemption limit, you must keep books and get a tax audit.
Declaring lower income
You can declare less than 8%, 6% or 50% only if you keep books and get them audited (where income exceeds the basic exemption limit). Try your figures in the presumptive income calculator.
Legal basis
- Sections 44AD, 44ADA and 44AE, Income-tax Act, 1961, now section 58, Income-tax Act, 2025
- Section 44AB, Income-tax Act, 1961, now section 63 (tax audit)
Official sources
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