Section 44ADA: Presumptive Taxation Scheme for Professionals

Section 44ADA of the Income Tax Act, 1961 provides a simplified presumptive taxation scheme for eligible professionals, allowing them to declare income at a fixed rate without maintaining detailed books of accounts or undergoing a tax audit.

1. Applicability

✅ Eligible Professionals:

• Doctors(Physicians, Surgeons, Dentists)
• Lawyers(Advocates, Solicitors)
• Chartered Accountants (CAs)
• Architects
• Engineers
• Interior Designers
• Technical Consultants
• Film Artists(Actors, Directors, Musicians)
• Company Secretaries (CS)
• Other notified professionals

❌ Exclusions:

• Businesses (covered under Section 44AD)
• Professionals earning non-professional income(e.g., rental income, capital gains)

2. Presumptive Income Calculation

Threshold Limit:

• Normal Cases: Gross receipts ≤ ₹50 lakh
• Cash-Light Professionals (≤5% cash receipts): Gross receipts ≤ ₹75 lakh(from AY 2024-25)

3. Key Benefits

✔ No Bookkeeping Required: No need to maintain books under Section 44AA.

✔ No Tax Audit (Section 44AB): Exempt if income declared at 50% of receipts.

✔ Simplified Compliance: No need to disclose expenses or depreciation.

✔ Can Claim Deductions: Can still claim deductions under Section 80C, 80D, etc.

4. Conditions & Restrictions

• Must Declare Minimum Income: 50% of gross receipts – cannot declare lower profits.
• If Declaring Lower Income:
  • Books & Audit Required: Must comply with Section 44AA & 44AB.
• No Expense Claims: Cannot separately deduct rent, salaries, etc.
• Advance Tax: Pay 100% by 15th March(no quarterly installments).

5. Example Calculation

Case: A doctor with ₹40 lakh gross receipts (₹35L digital + ₹5L cash).

• Presumptive Income: 50% of ₹40L = ₹20 lakh(taxable).
• Tax Payable: As per slab rates.

6. Opting Out of Presumptive Scheme

• Once opted, must continue for 5 years.
• If opted out: Must maintain books & undergo audit from the next year.

7. Comparison with Other Presumptive Schemes

8. Penalty for Non-Compliance

• Underreporting Income: Penalty up to 50-200% of tax evaded.
• Late Advance Tax: Interest under Section 234B/C.