# Presumptive Taxation for Business — Section 44AD
Section 44AD lets small businesses declare income on a presumptive (fixed percentage) basis instead of maintaining detailed books and computing actual profits.
## Who is eligible?
Eligible assessee: Only a Resident — Individual, HUF, or Firm (but NOT an LLP).
Not available to:
- Persons covered u/s 44AE (goods carriages) and 44ADA (professions),
- Persons earning income in the nature of commission or brokerage,
- Persons carrying on an agency business,
- Persons claiming benefit u/s 10AA or Chapter VI-A Heading 'C' deductions.
## Turnover limit
- Turnover from business must not exceed ₹2 crore.
- The limit is ₹3 crore if cash receipts ≤ 5% of total receipts.
## Presumptive income (deemed profit)
| Mode of receipt | Deemed profit |
|---|---|
| Turnover received in cash | 8% of turnover |
| Turnover received in prescribed (banking) modes u/s 40A(3) — received within the P.Y. or before the due date u/s 139(1) | 6% of turnover |
The assessee may always declare a higher income than the presumptive figure.
## The 5-year lock-in rule — Section 44AD(4)
This is the most heavily tested part of the section:
- Once an assessee opts for 44AD, they must continue declaring under it for the next 5 consecutive assessment years.
- If the assessee stops declaring under 44AD in any of those 5 years, they lose the benefit of 44AD for the next 5 years following the year of non-declaration.
- During the lock-out years, if income exceeds the basic exemption limit, the assessee must maintain books and get a tax audit u/s 44AB.
## Other key points
- No separate deduction for partner's interest/remuneration (unlike 44AE).
- All deductions u/s 30 to 38 are deemed already allowed.
- Advance tax: Only one instalment of 100% to be paid by 15th March of the financial year.
- No need to maintain books; tax audit does not apply where income is declared under 44AD(1).