Section 44ADA for professionals

May 20, 2017





With the start-up boom and globalization, lots of working professionals are getting into full time profession or on part-time basis.


Then the logical question arises, how the income will be taxed?


Interestingly, under Income Tax Act, there are two ways to pay tax:


  1. Maintain the books of accounts and pay tax on income, OR
  2. Pay on the basis of prescribed rates in income tax.


Many times for free-lancers or small time service providers, maintaining books of accounts could be a painful and tiring process. In that scenario, income tax can be paid on presumptive basis.


Sec 44ADA of Income Tax covers presumptive taxation for professionals.


• This section is proposed in line with the recommendation of Justice Easwar   Committee for simplification of taxation of professionals.


• Following objects are stated to be achieved through this proposal

  1. To bring parity between small businessmen (who enjoy presumptive taxation u/s 44AD) and small professionals
  2. To reduce compliance burden of small professionals
  3. To facilitate ease of doing profession


Section 44ADA – THE LAW


The following section shall be inserted with effect from the 1st day of April, 2017, namely:—


 (1) Notwithstanding anything contained in sections 28 to 43C, in the case of an assessee, being a resident in India, who is engaged in a profession referred to in subsection (1) of section 44AA and whose total gross receipts do not exceed fifty lakh rupees in a previous year, a sum equal to fifty per cent of the total gross receipts of the assessee in the previous year on account of such profession or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the assessee, shall be deemed to be the profits and gains of such profession chargeable to tax under the head "Profits and gains of business or profession".


(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of subsection (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed.


(3) The written down value of any asset used for the purposes of profession shall be deemed to have been calculated as if the assessee, had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.


(4) Notwithstanding anything contained in the foregoing provisions of this section, an assessee who claims that his profits and gains from the profession are lower than the profits and gains specified in subsection (1) and whose total income exceeds the maximum amount which is not chargeable to income  tax, shall be required to keep and maintain such books of account and other documents as required under subsection (1) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.



  1. This section applies to resident assesses only.


            Resident assessee who is

  1. Individual (or)
  2. Hindu undivided family (or)
  3. Partnership firm (other than limited liability partnership)
  1. Non resident assesses are not eligible to take benefit under this section.
  2. This section applies to profession referred to under Sec 44AA(1) as under:
  1. Legal
  2. Medical
  3. Engineering
  4. Architecture
  5. Accountancy
  6. Technical Consultancy
  7. Interior decoration
  8. Film artist
  9. Company Secretary
  10. Information Technology
  11. Any other profession notified by Board.


  1. Turnover/Gross receipts shall not exceed INR 50 lakh in a year. This can be proved by looking into the bank statement, cash book, bill or cash memo.
  2. If all the above conditions are satisfied, then a sum equal to 50% of the gross receipts of the assessee, on account of such profession shall be deemed to be the profits and gains of such profession chargeable to tax.
  3. The above assessee need not maintain his books of accounts under Sec 44AA(1) and need not get them audited under Sec 44AB.
  4. If assesses claim income less than 50% of the gross receipts, then he is required to maintain books of accounts and tax audit has to be done.
  5. The above provisions apply not withstanding anything to the contrary contained in Sec 28 to 43C.
  6. All the deductions shall be deemed to be allowed.
  7. Block of fixed asset shall be reduced from the block by depreciation which should be allowed if this benefit is not claimed.


Written down value (WDV) of depreciable assets shall be recomputed deducting depreciation which is deemed as allowed. E.g. If WDV (10%  Block) as on  1.04.2016 is Rs. 1,00,000/-, the depreciation deemed as allowed will be Rs. 10,000/- and   accordingly WDV as on 31.03.2017 will be Rs. 90,000/-.

  1. Assesses is required to pay advance tax as in case of normal assesses.
  2. Assesses can claim income more than 50% of the gross receipts.


Let’s say, Shyam is in the business of providing mobile app services to its client in USA. It bills INR 30,00,000 in a year. Then the profits of the business on presumptive basis will be INR 15,00,000. And then income tax has to be calculated accordingly.


Any person, who is eligible to avail the scheme of Presumptive Taxation as per eligibility mentioned above, can at any time opt for the scheme of Presumptive Taxation.

A person can opt out of the above scheme of Presumptive Taxation at any time. However, if a person opts out of the scheme of Presumptive Taxation, then he cannot avail the benefit of Presumptive Taxation for next 5 years.

For any help, please feel free to contact us at Our team will be privileged to serve you. Thank You!

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You say that provisions of 44ADA do not apply to a LLP but the same has not been provided in the section. It says resident assessee's and definition of assessee includes person, definition of person includes a firm and a firm includes an LLP. So please tell me why are these provisions not applicable to a LLP.

Dear Sir,

Presumptive taxation is not applicable to Companies and LLP's as preparation of books of accounts is mandatory in their respective acts. Thank You!

If a person is in the profession of Corporate Training where TDS is getting cut under section 194j and also registered for Service Tax under "Commercial Training and Coaching", then can such a professional also file returns under presumptive section 44ada?

Dear Sir,

According to my opinion, Section 44ADA is applicable for professionals mentioned in Sub-section 1 of Section 44AA. Corporate training is not specifically mentioned there, so Presumptive Taxation will not be applicable to him irrespective of the fact that TDS has been deducted under Section 194J.

Thank you!!

I am a computer professional but have not done well in business (working individually) this year and have earned about 6 lakhs total income. My expenditure has been about 4.5L related to earning this as I had to invest in consultants to get a job done but unfortunately did not get paid by end clients.
Now my CA says that you have to indicate 50% profit or undergo an audit which will cost about 10,000 Rs.
Basically I am already in a loss having earned hardly 1L.
Why should I have to spend 10000 Rs to audit my accounts when all income and expenditure are via cheques and I have bills and receipts to support them and there are no cash transactions.
Why is the government forcing us to undergo audits for a turnover of Rs 6L. Its not that I have made a turnover of Rs 25 Lakhs and above where I can afford audits etc.
In addition to 6L turnover I have earned 5L in fd interests and bank interests and already banks have deducted tds for the same.

6L turnover in nothing nowadays..Why should I not be allowed to file my tax returns in a normal way..Its very sad that the government is forcing entrepreneurs to an audit for a small sum of 6L of turnover.
The Income tax department should go through my tax filing and if they think its necessary should request me for an audit report...When its obvious to them that the details reported are genuine and reasonably OK they should go ahead and settle my filing thus saving me Rs 10,000 CA charges
Please advise how I can save this 10000 audit fee

Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette should show 50% or more of the gross receipts as Income. Else they should maintain the books of accounts and get it audited. In my opinion, in your case you can show this receipts as a business receipts rather than a profession receipts and file only the Income tax return.

Feel free to write back at

Thank You!

Hi ,

I am full time freelancer and I have recently churned my Mutual Funds portfolio. Since I have redeemed and switched to better performing funds, will this be considered as Capital Gains?

All this switches are more than one year in Growth Equity so they are eligible for LTCG Exempt Tax.

If Yes, can i file under 44ADA? Thanks

Dear Vikas Sir,

All the switches will be considered as redemption for the funds from where you have switched out. And yes, as it is Long term in equity it's exempt from tax. But, still you need to report the same in your return.

44ADA is related to professional income only. You may file under 44ADA if you are covered under that section.

Please feel free to write to us at in case of any further queries. Thank You!

Dear Madhushree

Thank you for your reply.

My income comes from professional income (Information Technology). Hence I assume that I am eligible to file under 44ADA.

However, i do not see any column in 44ADA to report this Long Term Capital Gains of Mutual Funds in the ITR-4. (Presumptive Taxation) . If I use the regular ITR-3 (Business from Income / Profession) then there is no provision to fill in the presumptive taxation.

Does that mean just because I switched some Mutual funds, I have to go through the hassles of filling up regular return and again maintain books of accounts , expenses , voucher etc?

Thanks again



Am a Legal Professional and eligible for filing return under sec 44ada..however if I have other incomes, bank interest, dividends, winnings from lotteries/races(taxable at special rates and TDS deducted) and losses from speculation including b/f speculation losses, How to show them in Return as there is no provision for showing all these heads of income/loss in ITR4. On last day I filed ITR4 only showing professional income. Now can I file ITR3 as revised return showing Income from profession @50% of receipts, and I do not maintain books with Gross profession receipts @6 lakhs?