Section 44ADA Presumptive Tax Guide — FY 2025-26
Section 44ADA: A presumptive taxation scheme under the Income Tax Act where specified professionals with gross receipts ≤ ₹75 lakh (FY 2025-26) are taxed on 50% of receipts as deemed profit — eliminating the need for books of accounts, audits, or expense documentation. Introduced in FY 2016-17, the limit was raised from ₹50L to ₹75L in Budget 2024.
How 44ADA Works — 3 Steps
1
Total your gross receipts
All invoices raised in FY (not cash received). Before TDS deduction.
2
Take 50% as income
No expense tracking needed. 50% is deemed profit — declare at least this much.
3
Pay tax on that income
Apply new or old regime slabs. File ITR-4 by 31 July.
44ADA Tax Table — FY 2025-26 (New Regime)
| Gross Receipts | Taxable (50%) | Income Tax (New Regime) |
|---|---|---|
| ₹10.0L | ₹5.0L | ₹0 ZERO |
| ₹20.0L | ₹10.0L | ₹0 ZERO |
| ₹24.0L | ₹12.0L | ₹0 ZERO |
| ₹30.0L | ₹15.0L | ₹1.1L |
| ₹40.0L | ₹20.0L | ₹2.1L |
| ₹50.0L | ₹25.0L | ₹3.4L |
| ₹60.0L | ₹30.0L | ₹5.0L |
| ₹75.0L | ₹37.5L | ₹7.3L |
⚠️ When 44ADA is NOT Beneficial
If your actual expenses exceed 50% of receipts, 44ADA forces you to pay tax on more than your actual profit. In this case, maintain books and claim actual expenses.
| Gross Receipts | Actual Expense % | Actual Profit | 44ADA Deemed (50%) | Over-taxed On |
|---|---|---|---|---|
| ₹30.0L | 60% | ₹12.0L | ₹15.0L | +₹3.0L over-taxed |
| ₹50.0L | 65% | ₹17.5L | ₹25.0L | +₹7.5L over-taxed |
| ₹75.0L | 70% | ₹22.5L | ₹37.5L | +₹15.0L over-taxed |
❓ FAQ — Section 44ADA
What is the 44ADA 50% rule?
Under Section 44ADA, 50% of your gross professional receipts is automatically treated as your taxable profit — regardless of your actual expenses. You cannot claim lower than 50% unless you maintain full books and get a CA audit done. If your actual profit is higher than 50%, you can declare more (voluntarily), but 50% is the statutory minimum.
Can a freelancer declare less than 50% profit under 44ADA?
No — if you opt for 44ADA, 50% is the minimum taxable profit you must declare. If your actual profit is less than 50% (i.e., your expenses exceed 50% of receipts), you should NOT opt for 44ADA. Instead, maintain proper books, claim actual expenses, and file ITR-3. A CA audit will be required if your receipts exceed ₹75 lakh.
Is 44ADA available in the new tax regime?
Yes — Section 44ADA is a method of computing income (presumptive), not a tax regime. You can choose 44ADA and then apply either old regime or new regime slabs on the resulting income. For FY 2025-26, the new regime is typically more beneficial for freelancers: zero tax up to ₹12L income (₹24L gross receipts under 44ADA).
What happens if I opt out of 44ADA?
If you opt out of 44ADA for any year, you cannot use 44ADA for the next 5 years. This is a critical rule — it prevents frequent switching between actual books and presumptive taxation. So if you switch to actual books in FY 2025-26, you must maintain books until FY 2029-30. Choose carefully based on your long-term income and expense profile.
Do I still file ITR if my income is zero under 44ADA?
You should file ITR even if tax is zero, if: (1) you have TDS deducted and want a refund, (2) your gross receipts exceed ₹2.5 lakh (good practice), or (3) you want to build ITR filing history for loan applications, visa processing, or other financial purposes. Filing ITR-4 with zero tax takes less than 30 minutes on the income tax e-filing portal.