Concepts · Glossary
Presumptive Taxation
Tax scheme where profits are presumed at a fixed percentage of receipts, no books required.
Presumptive taxation (Sections 44AD, 44ADA, 44AE of the Income Tax Act, 1961) lets small taxpayers declare a presumed percentage of gross receipts as taxable profit — 50% under 44ADA (specified professions), 8% under 44AD (business, 6% if non-cash), per-tonne basis under 44AE (goods transport).
Benefits: no books of accounts (Section 44AA(1) relief), no statutory audit, simpler ITR-4 filing. Constraints: 5-year lock-in after exit, gross receipts ceilings (Rs. 50/75L for 44ADA, Rs. 2/3 crore for 44AD), advance tax due in one lump sum on 15 March instead of quarterly.
Worked example
Rs. 30L gross under 44ADA → Rs. 15L deemed profit → tax at new regime slabs ≈ Rs. 1.05L (after 87A applies partially given the threshold). Same Rs. 30L under actual books with Rs. 5L expenses → Rs. 25L profit → tax ≈ Rs. 4L+. 44ADA saves Rs. 3L of tax if your real expenses are under 50%.
Practitioner tip
Decide presumptive vs actual at the END of the FY, not the start — you have until the ITR filing deadline to model both and pick the better one (for that one year, within the 5-year lock-out rules).
Related Tool
Free 44ADA Calculator →Manage this in HourSlip
Model presumptive vs actual tax automatically in HourSlip →Related glossary terms
- Section 44ADA — Presumptive taxation scheme for specified professionals — 50% of gross receipts is deemed profit.
- Section 44AD — Presumptive taxation for small businesses — 8% (or 6% if non-cash) of turnover is deemed profit.
- ITR-4 (Sugam) — Income tax return form for individuals on presumptive taxation (44AD/44ADA/44AE).
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These definitions are educational. Tax laws change annually — verify with a Chartered Accountant before making GST or income-tax decisions.