Taxation for Presumptive Income Under Section 44ADA

Taxation for Presumptive Income for professionals 44ADA

Professionals such as doctors, engineers, lawyers, interior designers and even chartered accountants who are self employed have to file their returns. Returns of professionals involve a balance sheet, profit & loss account and a capital account. It’s already difficult for them to set up their own practice, create a client base and try to survive in this competitive market. It can get harder if they are expected to maintain their books to the very detail.


Section 44ADA was introduced in Income Tax Act in 2017 to help self employed professionals enjoy the benefit of a simpler system for filing their tax returns. As per section 44ADA, every self employed professional whose gross receipts during the year is less than 50 lakh rupees is not required to maintain their books and other documents and get them audited. As per this section, the taxpayer can declare profit at the rate of 50% or more of their total gross receipts and not have to worry about maintaining the books of accounts.

Frequently Asked Questions

Q1. Who can apply for section 44ADA?


Any self – employed professional like doctors, engineers, lawyers, accountants, technical consultants, etc.


Q2. I am salaried individual but I do some freelance work on the side? Can I claim 44ADA?


Yes. 44ADA can be claimed for business income. The total income would be salary income plus half the profession income.


Q3. Are deductions allowed?


Yes. The normal deductions like Investments in PF, LIC, etc. are all allowed. Only your professional expenses cannot be taken.


Q4. What if profit goes below 50% or gross receipts for the year exceeds Rs. 50 lakhs?


44ADA cannot be applied in this case. The taxpayer would have to maintain books and get them audited the year in which this happens.


Q5. Is depreciation allowed?


The 50% that 44ADA allows is assumed to include depreciation so depreciation cannot be allowed as an expense. But the value of asset shown is balance sheet can be shown after deducting depreciation.


Q6. Which ITR Form to be filed?


Taxpayer is required to file ITR-4 for income under Section 44ADA.