Section 44ADA: Presumptive Taxation for Professionals

What is Section 44ADA?

Section 44ADA was the presumptive taxation provision for specified professions under the Income-tax Act, 1961. Instead of computing professional profit after separately claiming ordinary business or professional deductions, an eligible taxpayer could compute taxable professional income at the statutory presumptive rate, subject to the conditions of the section.

The provision operated notwithstanding the normal computation provisions in Sections 28 to 43C of the 1961 Act. It was intended to simplify income computation and compliance for smaller professional taxpayers.

Who could use Section 44ADA?

For the relevant years governed by the Income-tax Act, 1961, Section 44ADA applied to an assessee who satisfied all of the following conditions:

• The assessee was an individual or a partnership firm other than a limited liability partnership (LLP).
• The assessee was resident in India.
• The assessee carried on a profession referred to in Section 44AA(1).
• Total gross receipts from the profession remained within the applicable monetary ceiling.

An LLP is therefore not an eligible assessee for the professional presumptive scheme.

Which professions are covered?

Section 44ADA referred to the professions specified in Section 44AA(1). These include legal, medical, engineering, architectural, accountancy, technical consultancy and interior decoration, together with other professions notified by the Central Board of Direct Taxes.

Notified professional categories have included authorised representatives, film artists, company secretaries and the profession of information technology. Eligibility should be checked against the statutory provision and applicable CBDT notification for the relevant year.

Gross receipts limit: Rs. 50 lakh or Rs. 75 lakh

The higher Rs. 75 lakh ceiling was inserted by the Finance Act, 2023 with effect from 1 April 2024. For this 5% test, a receipt by a cheque or bank draft that is not account payee is treated as a cash receipt.

How is income calculated under Section 44ADA?

The presumptive professional income is 50% of total gross receipts from the eligible profession, or a higher amount if the assessee claims that a higher amount was actually earned.

Can professional expenses be claimed separately?

No separate deduction under Sections 30 to 38 of the Income-tax Act, 1961 was allowed after income was computed under Section 44ADA. Those deductions were treated as already given full effect while arriving at presumptive income.

The written down value of a professional asset was also calculated as though depreciation had been claimed and actually allowed for the relevant assessment years. This prevented a taxpayer from preserving a higher written down value merely because income was offered presumptively.

What if actual professional profit is below 50%?

Under Section 44ADA(4), where an assessee claimed professional profits below the presumptive amount and total income exceeded the maximum amount not chargeable to income-tax, the assessee was required to maintain the prescribed books and documents under Section 44AA and obtain and furnish the audit report required by Section 44AB.

The same broad compliance principle continues under the Income-tax Act, 2025: Section 58(3) links a claim of lower actual profit, where total income exceeds the maximum amount not chargeable to tax, with maintenance of books under Section 62 and audit under Section 63.

Section 44ADA after 1 April 2026: Section 58 of the Income-tax Act, 2025

The Income-tax Act, 2025 came into force on 1 April 2026 and repealed the Income-tax Act, 1961 subject to its repeal and savings provisions. Section 58 of the new Act consolidates presumptive taxation for certain businesses and professions.

For a specified profession, Section 58(2) retains the principal features familiar from Section 44ADA: the eligible taxpayer is a resident individual or resident firm other than an LLP; the normal gross-receipts ceiling is Rs. 50 lakh; the ceiling is Rs. 75 lakh where cash receipts do not exceed 5% of gross receipts; and presumptive income is 50% of gross receipts or the higher profit actually claimed to have been earned.

Under Section 58(9), a non-account-payee cheque or bank draft is treated as a cash receipt for the 5% test. Section 62 now deals with maintenance of books of account, while Section 63 deals with audit of accounts.

Practical points for professionals

• First identify the law governing the income period: the 1961 Act for periods before 1 April 2026, and the 2025 Act for Tax Year 2026-27 onward.
• Confirm that the profession is a specified profession and that the taxpayer is an eligible resident individual or non-LLP firm.
• Measure gross professional receipts for the entire relevant year.
• Check the cash-receipt percentage before relying on the higher Rs. 75 lakh ceiling.
• Remember that ordinary professional deductions are absorbed in the presumptive computation and are not separately deducted from the presumptive income.
• If declaring lower profit, examine the books and audit requirements for the relevant law and tax year.