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Microlesson · 5-min read

Presumptive Taxation of Professionals — Section 44ADA

# Presumptive Taxation for Professionals — Section 44ADA

Section 44ADA provides a presumptive scheme for small professionals carrying on a notified profession.

## Who is eligible?

Eligible assessee: Only a Resident — Individual or Partnership firm (but NOT an LLP) — engaged in a profession notified under Section 44AA(1) (e.g. legal, medical, engineering, accountancy, technical consultancy, interior decoration, etc.).

## Gross receipts limit

  • Gross receipts must be ≤ ₹50 lakh.
  • The limit is ₹75 lakh if cash receipts ≤ 5% of gross receipts.

## Presumptive income

  • 50% of gross receipts, or a higher sum actually claimed by the assessee.

## Books and audit

  • If income is declared on the presumptive (50%) basis, no books need be maintained and tax audit does not apply.
  • However, if the assessee declares income lower than 50% AND total income exceeds the basic exemption limit, then maintaining books and getting a tax audit u/s 44AB becomes mandatory.

## Other key points

  • No deduction for partner's interest/remuneration (same restriction as 44AD).
  • All deductions u/s 30 to 38 deemed already allowed.
  • Advance tax: Only one instalment of 100% by 15th March of the financial year.

Worked example

### Example 1

Basic computation. A resident doctor has gross receipts of ₹48 lakh. Presumptive income u/s 44ADA = 50% × ₹48,00,000 = ₹24,00,000. No books or audit required.

### Example 2

Enhanced ₹75 lakh limit. A practising lawyer has gross receipts of ₹70 lakh, of which only ₹2 lakh is in cash (2/70 = 2.86% ≤ 5%). Since cash receipts are within 5%, the ₹75 lakh limit applies ⇒ still eligible; presumptive income = ₹35,00,000.

### Example 3

Declaring lower income. A CA with gross receipts of ₹40 lakh wants to declare actual profit of ₹12 lakh (below ₹20 lakh = 50%). As ₹12 lakh exceeds the basic exemption limit, the CA must maintain books and obtain a tax audit u/s 44AB.

⚠️ Common exam mistakes

  • Extending 44ADA to an LLP — only individuals and (non-LLP) partnership firms qualify.
  • Using 8%/6% (the 44AD rates) for professionals — the professional presumptive rate is a flat 50%.
  • Assuming no audit is ever needed under 44ADA — if lower income is declared and income exceeds the exemption limit, books + audit become mandatory.
  • Confusing the turnover limit with the receipts limit — 44ADA uses GROSS RECEIPTS of ₹50 lakh / ₹75 lakh.
Bare-Act text Section 44ADA · Income-tax Act, 1961 · click to expand
Section 44ADA(1): In the case of an assessee, being a resident individual or partnership firm (other than a limited liability partnership) engaged in a profession referred to in section 44AA(1), a sum equal to 50% of the total gross receipts (or a higher sum claimed to have been earned) shall be deemed to be the profits and gains of such profession, provided gross receipts do not exceed ₹50 lakh (₹75 lakh where cash receipts do not exceed 5% of gross receipts).
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