Income Tax · Glossary
Section 44ADA
Presumptive taxation scheme for specified professionals — 50% of gross receipts is deemed profit.
Section 44ADA of the Income Tax Act, 1961 lets specified professionals (legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, film artists, IT consultants per CBDT notification) declare 50% of their gross receipts as taxable profit — no books, no audit, no actual-expense tracking required.
Gross receipts ceiling: Rs. 50 lakh in standard mode, Rs. 75 lakh if 95% of receipts are non-cash (bank transfer, UPI, cheque, credit card) — the higher limit was raised by the Finance Act 2023. Once you exit 44ADA to claim actual expenses, you cannot re-enter for 5 years under sub-section (4).
Worked example
Priya’s FY 2026-27 gross receipts: Rs. 24 lakh, all bank/UPI. Under 44ADA, taxable income = 50% = Rs. 12 lakh. New-regime tax on Rs. 12 lakh is fully offset by 87A rebate of Rs. 60,000 → final tax = zero (plus Rs. 0 cess).
Practitioner tip
The 5-year lock-out after exit is real — don’t opt out for a single bad year. If you have one year of high expenses, consider whether deferring some receipts to the next FY (where legal) keeps you under the 44ADA umbrella.
Frequently asked
- Who counts as a "specified professional" under 44ADA?
- Legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, and other professions notified under Section 44AA(1) read with Rule 6F. CBDT Notification 89/2008 included film artists. Software developers and IT consultants qualify under the "technical consultancy" head — explicitly confirmed in CBDT guidance and multiple ITAT rulings.
- Can I claim Section 80C deductions on top of 44ADA?
- Yes — 44ADA gives you the gross-to-taxable conversion; Chapter VI-A deductions (80C, 80D, etc.) apply on top in the OLD regime. The NEW regime disallows most Chapter VI-A so the order doesn’t matter there — your effective income is still 50% of receipts.
Related Tool
Free 44ADA Calculator →Manage this in HourSlip
Track receipts and compute 44ADA tax in HourSlip →Related glossary terms
- Section 44AD — Presumptive taxation for small businesses — 8% (or 6% if non-cash) of turnover is deemed profit.
- ITR-4 (Sugam) — Income tax return form for individuals on presumptive taxation (44AD/44ADA/44AE).
- Presumptive Taxation — Tax scheme where profits are presumed at a fixed percentage of receipts, no books required.
Sources
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These definitions are educational. Tax laws change annually — verify with a Chartered Accountant before making GST or income-tax decisions.