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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I earn a professional fee of Rs 20 lac per annum in consulting an engineering firm.
However my family runs a business on my name where other gains could be accrued to me where the total income might go above 50 lac
I am still eligible for 44 ADA as a professional charging a professional fee for the 20 lac in consulting ?

sir i am getting salary from hospita as well as i am getting intrest/renumeration/short term capital gain all this included in my gross receipt? and what about section 80c ,80D should we get benifits under this or we have to maintain books kindly let me know thanks

section 44ADA speaks of professional receipts and income from other sources like interest income,dividends,bank interest are not included in computing the gross receipts

Sir I am a professional teacher where 194j is deducted , will I get deductions of 50% in 44ADA

You may file ITR-3 as revised return as there is no restriction in this regard.

Since your gross receipts is up-to 50 Lacs, you may opt for presumptive taxation scheme.

Further ITR 4 does not contain any field for filling the information related to any other businesses. Whereas ITR 3 contains the same.

So you may file ITR-3 with presumptive income for your professional income as ITR-3 also contains fields for furnishing details related to professions where regular books of accounts are not maintained."

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?

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



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!

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

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!