Eligibility, Turnover & Filing under 44AD and 44ADA: All about Presumptive Taxation Scheme

If you run a business in India, you probably spend most of your time managing operations, negotiating with suppliers, exploring funding opportunities, and expanding into new markets. In the middle of all this, sitting down to maintain detailed accounts or deal with endless tax paperwork can feel like a distraction from your real work.

That’s exactly where the presumptive taxation scheme helps. Introduced under the Income Tax Act, it’s designed to make compliance simpler for entrepreneurs, professionals, and small businesses.

Instead of recording every single expense or maintaining complex ledgers, the scheme allows you to declare income at a fixed percentage of your turnover. This way, you can stay compliant without needing a full-time focus on accounting.

But what exactly is this scheme, and how does it fit into your business or profession? Let’s start from the beginning.

What Is the Presumptive Taxation Scheme in India?

The presumptive taxation scheme is a simplified income tax scheme in India for small taxpayers. Instead of computing profits after every expense, you declare a fixed percentage of your turnover as your taxable income is known as presumptive income calculation.

Various sections under the Income Tax Act that offer presumptive taxation benefits are:

• Section 44AD – for small businesses
• Section 44ADA – for professionals such as doctors, consultants, and chartered accountants
• Section 44AE – for transporters

This approach removes the need for maintaining detailed books of accounts and audits. It helps you meet compliance requirements quickly while freeing up your energy to focus on growth, client delivery, and strategic expansion.

Now that you understand the basic idea, the next question is who can opt for it?

Who Can Opt for the Presumptive Taxation Scheme?

1) Section 44AD: For Businesses

Under Section 44AD, the scheme is applicable to resident individuals, Hindu Undivided Families (HUFs), and partnership firms engaged in any business except the transporter business. Typical examples include small retailers, traders, manufacturers, or service providers whose turnover stays within prescribed limits.

Ineligible persons under Section 44AD

• Non-residents
• Persons who have taken specific deductions
• Persons in agency business
• Persons in professions as per Section 44AA
• Persons having commission or brokerage income/insurance agents
• Companies or LLPs

2) Section 44ADA: For Professionals

For resident individuals and partnership firms (excluding LLPs) whose turnover stays within prescribed limits, engaged in professions like-

• Accountancy (includes accountants, chartered accountants)
• Law
• Medicine
• Engineering or architecture
• Technical consultancy
• Interior design/decoration, and similar notified fields

This category covers presumptive taxation for professionals like doctors, consultants, and CAs who prefer a simpler tax structure.

3) Section 44AE: For Transporters

Any person (including company, LLP, etc.) operating (plying, hiring, leasing) up to ten goods carriages can compute income on a per-vehicle-per-month basis under this simplified income tax scheme India, making small business tax filing much easier for transport operators and logistics providers.

These categories were carefully designed to cover India’s most common small-scale business and professional setups, ensuring both 44ADA eligibility for professionals and streamlined compliance for traders and transporters.

But before you decide whether you’re eligible, you’ll need to check your turnover limits because that determines whether you can actually opt for this scheme and complete your ITR filing under presumptive taxation correctly.

Turnover Limits for FY 2024–25

The government periodically revises limits to make the scheme relevant and encourage digital adoption. For FY 2024–25 (AY 2025–26), the turnover and receipts limits are as follows –

Section	Applicable to	Turnover	Conditions
44AD	Small Business	Up to ₹2 crore	Up to ₹3 crore if cash receipts ≤ 5% of total turnover
44ADA	Specified professionals	Up to ₹50 lakh	Up to ₹75 lakh if cash receipts ≤ 5% of total receipts

This means that if your business or professional receipts are largely digital which is true for most modern firms today as you can enjoy a higher threshold.

Once you know you fall within these limits, the next step is to understand how the actual income calculation works under this scheme.

How Is Income Calculated Under Presumptive Taxation?

Unlike regular taxation, where you track every rupee spent, presumptive taxation uses straightforward percentages to calculate taxable income (presumptive income calculation).

A. Under Section 44AD: For businesses

Step 1: Note your total turnover from your bank.

Step 2: Classify it into digital and cash receipts.

Step 3: Apply the rate:

• 6% of digital receipts, and
• 8% of cash receipts.

Example:
If your total turnover is ₹50 lakh with ₹40 lakh digital and ₹10 lakh cash, your deemed income will be:

• ₹40 lakh × 6% = ₹2.4 lakh
• ₹10 lakh × 8% = ₹0.8 lakh
   Total taxable income = ₹3.2 lakh

B. Under Section 44ADA: For professionals

Professionals can declare 50% of gross receipts as income.

Example:
 A consulting firm earning ₹60 lakh (98% digital) qualifies for the ₹75 lakh limit.
 50% of ₹60 lakhs = ₹30 lakh deemed income as per ITR filing under presumptive taxation.

C. Under Section 44AE: For transporters

For heavy goods vehicles-@ Rs. 1,000 per ton of gross vehicle weight for every month or part of a month. For other vehicles – @ Rs. 7,500 for every month or part of a month.

Example:

If you have 3 heavy goods vehicles and 2 light goods vehicles. Heavy goods vehicle is plying for all 12 months carrying 10 tons per month & light good vehicle is plying for all 12 months then the presumptive income will be:

• 3 × 1000 × 10 × 12 months = 3,60,000
• 2 × 7500 × 12 months = 1,80,000
   Total = 5,40,000

With such simple calculations, the scheme ensures speed, clarity, and accuracy.

Filing ITR Under the Presumptive Taxation Scheme

Here’s how you can file seamlessly:

• Confirm your eligibility under Section 44AD, 44ADA, or 44AE.
• Compute your income using the appropriate percentage or formula.
• Use ITR-4 (Sugam) form on the Income Tax Department portal.
• Pay advance tax by 15 March of the financial year.
• File and e-verify the return by the due date.
• Keep basic proof of bank statements, sale invoices, purchase invoices, expense proofs, turnover, creditor/debtor, inventory details etc. (ITR filing under presumptive taxation)

Benefits of Presumptive Taxation

• Simplified Compliance: Less paperwork and easier record-keeping.
• Audit Exemption: No need for a detailed audit within prescribed turnover limits.
• Predictable Tax Planning: Fixed income rates mean no last-minute surprises.
• Encourages Digital Payments: Businesses adopting digital receipts benefit from a lower rate of 6%.
• Saves Time and Cost: Perfect for early-stage founders and professionals who want compliance without complexity.

For a small enterprise or consultancy firm, this translates into less stress and more focus on strategy, expansion, and growth (small business tax filing). For startup support, see Startup Consultancy.

For deeper insights on how startups can manage compliance, taxation, and growth from the ground up, visit our Startup Consulting Firm knowledge section.

Conclusion (CTA)

For founders, consultants, and independent professionals, every minute spent on paperwork is a minute taken away from running the business. The presumptive taxation scheme solves that problem by offering a clean, predictable, and transparent way to stay tax compliant (simplified income tax scheme India).

Disclaimer

This blog is not an opinion nor an advise. The writer has tried to break down the complicated law in simplified language for its readers. However, there may be cases where the thumb rules may not apply or the law applies differently or a professional may have varied opinions.

FAQs

1. What are the benefits for small businesses?

Simpler compliance, no audit, reduced accounting effort, and predictable taxation.

2. Is a presumptive taxation scheme mandatory?

It’s optional. Taxpayers can choose it if it suits their business model.

3. What is the turnover limit for FY 2024–25?

₹2 crore (or ₹3 crore for digital) for businesses, and ₹50 lakh (or ₹75 lakh for digital) for professionals (44AD turnover limit 2025).

4. How is income calculated under Section 44AD and Section 44ADA?

6%/8% of turnover for businesses and 50% of receipts for professionals (presumptive income calculation).

5. How do I file an ITR under this scheme?

File ITR-4 (Sugam) online, pay advance tax, and e-verify your return on the official Income Tax Department site (ITR filing under presumptive taxation).

6. Are there any deductions available under presumptive Taxation Scheme?

No deductions, expenses for business/profession are allowed. However, partnership firms under section 44AE can claim deduction on account of remuneration and interest paid to partners.

7. Can I opt out of the presumptive scheme once adopted?

Yes, a person can opt out however, the scheme would not be available then for the next 5 years and the person would have to maintain books of accounts and get a tax audit done from the year in which the person opted out.

8. Can I declare income lower than the presumptive tax scheme?

A person can declare a lower income than prescribed rates however, then maintenance of books of accounts & tax audit becomes mandatory.