Glossary · Income Tax
Section 44ADA
Presumptive-taxation scheme for specified professionals (doctors, lawyers, architects, CAs, etc.) with gross receipts up to ₹75 lakh.
What Section 44ADA allows
Section 44ADA, inserted by the Finance Act, 2016 and effective from AY 2017-18, allows specified professionals to declare 50% of gross receipts as business income without maintaining books of account. Specifed professions include legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, or any other profession as notified by the Central Board of Direct Taxes.
Receipts limits for FY 2024-25 (AY 2025-26)
The presumptive scheme applies if gross receipts do not exceed ₹75 lakh in the previous year. Where cash receipts exceed 5% of total receipts, the limit drops to ₹50 lakh. Both limits apply to the immediately preceding financial year. The threshold is per professional, not per assessee.
Deemed income rate
Income is deemed at 50% of gross receipts. The remaining 50% is deemed to cover all business expenses. The assessee cannot declare income lower than 50%, even if actual income is lower; however, declare lower income is permitted only if books of account are maintained.
Who can use Section 44ADA
Resident individuals and partnership firms (excluding LLPs) who are members of a recognised professional body or carry on a notified profession. Professionals with business income (e.g. a doctor selling pharmacy products) must split income — profession income under Section 44ADA, business income under Section 44AD.
Who cannot use Section 44ADA
Limited liability partnerships, companies, foreign entities, and assesses carrying on any business other than a notified profession. Professionals earning business income from sources outside their profession (e.g. consulting income for a lawyer writing a book) must declare the non-professional portion separately.
Advance tax under Section 44ADA
Like Section 44AD, advance tax under Section 44ADA is paid in a single instalment by 15 March. The four-instalment advance-tax schedule under Sections 207-211 does not apply. Interest under Sections 234B and 234C is levied on default.
Section 44ADA vs Section 44AD
Section 44ADA is for specified professionals; Section 44AD is for businesses. Section 44ADA deems 50% income; Section 44AD deems 8%/6%. The turnover / receipts limits differ. The same assessee carrying on both profession and business must apply the two sections separately to each income stream.
Common mistakes
(1) Using Section 44ADA for non-notified professions. (2) Claiming for cash receipts above 5% of total. (3) Declaring income below 50% without maintaining books. (4) Missing the 15 March advance-tax deadline. (5) Filing ITR-1 instead of ITR-4.
Example
A chartered accountant with gross receipts of ₹60 lakh (₹5 lakh cash, ₹55 lakh digital) declares presumptive income of ₹30 lakh. Books are not required. Advance tax of ₹30 lakh is paid by 15 March. ITR-4 is filed by 31 July (or 31 October with audit if gross receipts exceed ₹1 crore).
Recent amendments
Finance Act 2016: introduced Section 44ADA with initial receipts limit of ₹50 lakh. Finance Act 2021: limit raised to ₹75 lakh. Notification 21/2019: notified additional professions for the scheme. CBDT Circular 17/2019: clarified that gross receipts include all professional receipts, not just fees.