Section 44AD presumptive taxation explained
Section 44AD lets an eligible small business declare profit at a fixed percentage of turnover instead of keeping full books: 8% of turnover, or 6% for receipts through banking channels and digital modes. The turnover limit is ₹2 crore, raised to ₹3 crore where cash receipts do not exceed 5%. Check current limits and section numbers before use.
Who can use Section 44AD?
Resident individuals, HUFs and partnership firms (not LLPs) with eligible business income and turnover within the limit. Professionals such as doctors, lawyers and consultants usually use Section 44ADA instead.
A simple example
If your turnover is ₹50 lakh, all received digitally, deemed profit at 6% is ₹3 lakh. You pay tax on ₹3 lakh instead of on actual profit, and you are not required to maintain full books for that purpose.
What are the trade-offs?
If you opt in and later opt out, you cannot use the scheme again for the next five years. If you report a lower profit than the deemed rate while your income exceeds the basic exemption limit, books and an audit may be required. If your real margin is higher than 6–8%, 44AD can save tax; if it is lower, regular books may be better.
Frequently asked questions
Is 44AD good for a small trader?
It can be if your real profit margin is above the deemed rate. FINOVAQ compares presumptive tax with regular books using your own numbers.
Does 44AD apply to GST?
No. Income tax and GST are separate. You still file GST returns if you are registered.