Section 44ADA Presumptive Taxation for Professionals FY 2025-26: ₹50 Lakh Limit and the 50% Rule
Section 44ADA allows a resident individual or partnership firm in a specified profession with gross receipts up to ₹50 lakh, or ₹75 lakh if at least 95% of receipts are digital, to declare 50% of receipts as taxable income without maintaining books or getting a tax audit. It covers legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, film artists, company secretaries and IT professionals. F&O trading is a business, not a profession, and is not eligible.
Key facts, FY 2025-26
- Receipts limit
- ₹50 lakh; ₹75 lakh if cash receipts are 5% or less of total
- Presumed income
- 50% of gross receipts (higher if you choose)
- Who can opt
- Resident individuals and partnership firms (not LLPs) in a profession notified under section 44AA(1)
- Books and audit
- Not required within the limit
- Advance tax
- Single instalment of 100% by 15 March
- Not eligible
- F&O and intraday traders, commission agents, non-residents, LLPs, professions outside the 44AA(1) list
How it works
Section 44ADA of the Income-tax Act 1961 is the professional counterpart of section 44AD. If you are a freelancer, consultant or practitioner in one of the notified professions, you can declare half of your gross receipts as income and pay tax on that at slab rates. The other half is deemed to cover all your expenses, whether you actually spent it or not. No profit and loss account, no balance sheet, no tax audit.
The receipts limit is ₹50 lakh in a financial year. From FY 2023-24 it is ₹75 lakh if cash receipts are not more than 5% of total receipts, which most freelancers paid by bank transfer or through platforms easily satisfy. Gross receipts means the fees you billed and received, before TDS. The TDS deducted by clients under section 194J at 10% is credited against your tax, so a 44ADA filer with modest income usually gets a refund.
Eligibility depends on the profession, not the job title. Section 44AA(1) lists legal, medical, engineering, architectural, accountancy, technical consultancy and interior decoration, and the CBDT has notified film artists, authorised representatives, company secretaries and information technology professionals. Software developers, designers working on technical consultancy contracts and doctors qualify. A YouTuber, a trader in shares or a commission agent does not; they fall under section 44AD, if at all, or regular books.
Unlike 44AD there is no five-year lock, but the audit rule still bites. If you declare income below 50% of receipts and your total income is above the basic exemption limit, you must keep books under section 44AA and get them audited under section 44AB, signed by an empanelled Chartered Accountant. Chapter VI-A deductions remain available under the old regime, and you can pick either regime each year. Receipts from abroad count the same as domestic receipts, so a developer billing US clients in dollars reports the rupee value received, and GST registration is a separate question decided by the ₹20 lakh threshold, not by 44ADA.
| Profession | Source | Examples |
|---|---|---|
| Legal | Section 44AA(1) | Advocates, legal consultants |
| Medical | Section 44AA(1) | Doctors, dentists, physiotherapists in private practice |
| Engineering | Section 44AA(1) | Consulting engineers, freelance structural or civil engineers |
| Architecture | Section 44AA(1) | Architects, urban planners |
| Accountancy | Section 44AA(1) | Cost accountants, chartered accountants in practice |
| Technical consultancy | Section 44AA(1) | Software developers, IT consultants, data professionals |
| Interior decoration | Section 44AA(1) | Interior designers |
| Film artists | CBDT notification | Actors, directors, editors, music directors, singers |
| Company secretary, authorised representative, IT professional | CBDT notification | Practising CS, tax representatives, information technology professionals |
Worked example: Freelance software developer in Mohali, receipts ₹36 lakh, new regime
- Gross professional receipts (all by bank transfer)
- ₹36,00,000
- Presumed income at 50%
- ₹18,00,000
- Tax at new regime slabs on ₹18 lakh
- ₹1,60,000
- Cess at 4%
- ₹6,400
- Total tax
- ₹1,66,400
- TDS already deducted by clients under 194J at 10%
- ₹3,60,000
- Refund due
- ₹1,93,600
Common mistake: F&O trading and 44ADA
Futures and options trading is a non-speculative business, not a profession. It cannot be reported under 44ADA, and 44AD applies only if turnover, computed from absolute profits and losses, is within ₹2 crore or ₹3 crore and you are willing to declare 6% of that turnover as profit. Most traders with real losses need books and ITR-3 instead. A second frequent error is a professional with a ₹60 lakh salary plus ₹20 lakh consulting income assuming 44ADA covers both; it covers only the professional receipts.
What to do next
Total the fees received in FY 2025-26 from bank statements and match them with Form 26AS and the AIS, where every 194J deduction appears. Confirm the profession fits the 44AA(1) list. If your receipts crossed ₹50 lakh but cash was under 5%, you are still inside the ₹75 lakh limit. File ITR-4 if you have no capital gains and at most one house property, otherwise ITR-3 with the presumptive schedule. If you also registered for GST because receipts crossed ₹20 lakh, keep the GSTR-3B turnover consistent with the ITR figure. An expert-assisted freelancer return reconciles all three and confirms the profession fits the notified list before the presumptive schedule is used.
Section 44ADA: questions
What is the limit for section 44ADA in FY 2025-26?
Gross receipts of ₹50 lakh. The limit is ₹75 lakh if cash receipts are 5% or less of total receipts. Above that you must keep books and get a tax audit.
How much income is presumed under 44ADA?
50% of gross receipts. You may declare more if your actual profit is higher. Declaring less requires books of account and, if income exceeds the exemption limit, a tax audit.
Which professions are eligible for 44ADA?
Legal, medical, engineering, architecture, accountancy, technical consultancy and interior decoration under section 44AA(1), plus film artists, authorised representatives, company secretaries and information technology professionals notified by the CBDT.
Can F&O traders use section 44ADA?
No. Trading in futures and options is a business, not a profession. It may fall under section 44AD if turnover is within the limit, but with real losses most traders file ITR-3 with books.
Can I claim expenses in addition to the 50% under 44ADA?
No. The 50% presumed income is after all expenses and depreciation. You can still claim Chapter VI-A deductions such as 80C, 80D and 80CCD(1B) under the old regime.
Is there a 5-year lock-in under 44ADA?
No. The five-year exclusion applies only to section 44AD. A professional can opt in or out of 44ADA year by year, but declaring below 50% in a year triggers books and audit for that year.
Can a freelancer with salary income also use 44ADA?
Yes. The presumptive scheme applies to the professional receipts. Salary is reported separately under the head salaries, and the two are added to arrive at total income. Use ITR-4 if there are no capital gains, otherwise ITR-3.
When is advance tax due under 44ADA?
In one instalment of 100% by 15 March of the financial year. Interest under section 234C applies only if that instalment is short. Deduct the TDS your clients have already deposited before computing the amount.
Related sections and forms
- Section 44ADSection 44AD allows a resident individual, HUF or partnership firm with business turnover up to ₹2 crore, or ₹3 crore if at least 95% of receipts are digital, to declare profit at 8% of turnover (6% for amounts received digitally) without maintaining books of account or getting a tax audit. Once you opt out after using it, you cannot return for 5 years. Advance tax is paid in one instalment by 15 March.
- ITR-4 (Sugam)ITR-4, called Sugam, is the presumptive taxation return for resident individuals, HUFs and partnership firms (not LLPs) with total income up to ₹50 lakh who declare business profit at 8% or 6% of turnover under section 44AD, professional income at 50% of receipts under 44ADA, or goods-carriage income under 44AE. It also takes salary, one house property, other sources and small 112A gains. No balance sheet or profit and loss account is required, and the due date for AY 2026-27 is 31 July 2026.
- Form 26ASForm 26AS is your annual tax statement: every rupee of TDS and TCS credited to your PAN, the advance tax and self-assessment tax you paid, and the refunds issued, for one financial year. You open it from the e-filing portal, which hands you over to TRACES. Before filing ITR for AY 2026-27, the TDS you claim must match what 26AS shows, or the credit is cut in the 143(1) intimation.
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General information for FY 2025-26, not professional advice. Limits and dates change with each Budget; the updated date above is when this page was last checked. Disclaimer