Income Tax · Glossary
Section 44AD
Presumptive taxation for small businesses — 8% (or 6% if non-cash) of turnover is deemed profit.
Section 44AD of the Income Tax Act, 1961 is the business equivalent of 44ADA. Small businesses (eligible: individuals, HUFs, partnership firms other than LLPs) with turnover up to Rs. 2 crore (Rs. 3 crore if 95% non-cash, per the Finance Act 2023 increase) can declare 8% of turnover as taxable profit. The rate drops to 6% for non-cash receipts.
Like 44ADA, no books or audit required. 5-year lock-in after exit. Not applicable to specified professions (use 44ADA instead) or to taxpayers who are an LLP, company, or AOP.
Worked example
An e-commerce reseller with Rs. 80 lakh non-cash turnover declares 6% = Rs. 4.8 lakh as deemed profit under 44AD — fully under the 87A rebate threshold, no tax due.
Practitioner tip
If you sell on multiple platforms, aggregate the turnover across all of them when checking the Rs. 2 / 3 crore ceiling — the limit is per-PAN, not per-platform.
Related glossary terms
- Section 44ADA — Presumptive taxation scheme for specified professionals — 50% of gross receipts is deemed profit.
- Presumptive Taxation — Tax scheme where profits are presumed at a fixed percentage of receipts, no books required.
- ITR-4 (Sugam) — Income tax return form for individuals on presumptive taxation (44AD/44ADA/44AE).
More in Income Tax
These definitions are educational. Tax laws change annually — verify with a Chartered Accountant before making GST or income-tax decisions.