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Income Tax · Glossary

Section 44AD

Presumptive taxation for small businesses — 8% (or 6% if non-cash) of turnover is deemed profit.

Updated 2026-10-08Source: Income-tax Act · CGST Act · CBDT/CBIC

What it means

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. Unlike 44ADA, 44AD has a five-year bar after exit (Section 44AD(4)). Not applicable to specified professions (use 44ADA instead) or to taxpayers who are an LLP, company, or AOP.

From tax year 2026-27 the same scheme is s.58(2) (Table Sl. No. 1) of the Income-tax Act 2025, and the five-year bar moves to s.58(7).

A 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.

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.

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Look up the details

Income-tax entries cite the Income-tax Act 1961, which governs FY 2025–26 (the return filed in 2026); from tax year 2026–27 the Income-tax Act 2025 applies, with new section numbers shown where we give them. GST law is unchanged. General information, not tax advice; verify with your CA before you file.

Related terms

Income Tax

Section 44ADA

Presumptive taxation scheme for specified professionals — 50% of gross receipts is deemed profit.Concepts

Presumptive Taxation

Tax scheme where profits are presumed at a fixed percentage of receipts, no books required.ITR

ITR-4 (Sugam)

Income tax return form for individuals on presumptive taxation (44AD/44ADA/44AE).

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