44ADA of income tax act lets a resident professional treat 50% of gross receipts as taxable profit and skip detailed books, as long as receipts for the year are up to ₹50 lakh, or up to ₹75 lakh when cash receipts are 5% or less. The other half is assumed to cover every expense: rent, staff, travel, laptop and internet.
It suits a doctor running a small clinic, a lawyer, an architect, or a software consultant billing foreign clients. The rules here are for FY 2025-26 (return in AY 2026-27). From tax year 2026-27 the scheme is one row of the presumptive table in the new Act's section 58. Traders and shops have a separate scheme, explained in the 44AD guide.
Quick facts
Deemed profit
50% of gross receipts, or more if you chooseReceipts limit
₹50 lakh; ₹75 lakh if cash receipts are 5% or lessWho can use it
Resident individual or partnership firm (not an LLP) in a listed professionExpenses
No separate claim; the 50% covers themAdvance tax
Full amount by 15 MarchAudit trigger
Profit below 50% with income above the exemption limit (44AB(d))2025 Act
Covered in the presumptive table of section 58
44ADA of income tax act limit and rate
| Condition | Requirement |
|---|---|
| Residential status | Resident in India |
| Form of practice | Individual or partnership firm; LLPs and companies are out |
| Gross receipts | Up to ₹50 lakh; up to ₹75 lakh if cash received is 5% or less of the total |
| Profit to declare | At least 50% of gross receipts |
| Books | Not needed for the profession under the scheme |
The 50% figure is a floor, not a cap. If your real margin is 70%, you may declare 70%. If your real margin is 30%, you cannot simply show 30% under the scheme; see the audit point below.
What is 44ADA in income tax: the professions covered
The scheme is limited to the professions named in section 44AA(1) and those notified under it:
- Legal, medical, engineering and architecture
- Accountancy and technical consultancy
- Interior decoration
- Notified professions: film artists, company secretaries, authorised representatives and information technology professionals
A freelance developer, a UI designer working as a technical consultant, or a radiologist all fit. A content creator paid for brand promotions, a tuition centre, or an insurance agent paid commission usually does not, because those are business receipts. Commission income is taxed in the normal way, and small businesses look at 44AD.
Worked example: a software consultant
Facts. Arjun, resident, earns ₹42,00,000 in FY 2025-26 from consulting. ₹30,00,000 comes from overseas clients by bank transfer and ₹12,00,000 from an Indian client, who deducted 10% TDS of ₹1,20,000 under section 194J.
Step 1. Receipts are under ₹50 lakh, so 44ADA applies. Deemed profit is 50% of ₹42,00,000, which is ₹21,00,000.
Step 2, new regime slabs. ₹4 to 8 lakh at 5% is ₹20,000; ₹8 to 12 lakh at 10% is ₹40,000; ₹12 to 16 lakh at 15% is ₹60,000; ₹16 to 20 lakh at 20% is ₹80,000; the last ₹1 lakh at 25% is ₹25,000. Total ₹2,25,000.
Step 3. Add 4% cess of ₹9,000. Tax is ₹2,34,000. Less TDS of ₹1,20,000 leaves ₹1,14,000, payable as advance tax by 15 March.
If an architect billed ₹68,00,000 with only ₹2,00,000 in cash (about 2.9%), she stays inside the higher ₹75 lakh ceiling, so ₹34,00,000 is her taxable profit.
Showing less than 50%: audit and books
A professional whose real profit is below half of receipts can declare the lower figure, but then the scheme no longer protects him. He must keep books under section 44AA and, once his total income passes the exemption limit, have them audited under section 44AB(d). Read the tax audit guide for dates.
Unlike 44AD, there is no five-year bar. A consultant can use 44ADA one year, keep books and show actual profit the next, and come back later.
Advance tax and the return
Professionals on 44ADA pay their entire advance tax by 15 March, once tax after TDS reaches ₹10,000. Short payment draws interest at 1% a month under section 234C, and also 234B if the year ends with tax still unpaid.
ITR-4 Sugam fits when your total income stays within ₹50 lakh and you have no items that need ITR-3, such as capital gains or more than one house property. For AY 2026-27 the department's reminder gave non-audit business and professional taxpayers a due date of 31 August. File on the e-filing portal, and match receipts with the TDS shown in AIS and Form 26AS.
Section 44ADA after 1 April 2026
| Item | FY 2025-26 | Tax year 2026-27 |
|---|---|---|
| Provision | Section 44ADA, 1961 Act | Section 58 table, 2025 Act |
| Deemed rate | 50% | 50% |
| Receipts limits | ₹50 lakh, ₹75 lakh with low cash | Same limits carried over |
| Advance tax | One instalment by 15 March | One instalment by 15 March |
The change is in the law's address, not in the arithmetic. Fees received for work done before 1 April 2026 still belong to FY 2025-26.
Where 44ADA claims go wrong
| Mistake | Correction |
|---|---|
| Claiming laptop depreciation and rent on top of the 50% | Not allowed; the deemed rate absorbs them |
| Using 44ADA through an LLP | An LLP must compute actual profit |
| Ignoring the 5% cash test when receipts are between ₹50 lakh and ₹75 lakh | Above ₹50 lakh the scheme works only if cash is 5% or less |
| Paying advance tax in four parts and then panicking about 234C | One payment by 15 March is enough for 44ADA |
Read this as a general explanation of 44ADA, not a view on your own practice. Rates and limits can be amended, so take current figures from your own chartered accountant or the department's portal first.
Sources we checked
- Income-tax Act, 1961, section 44ADA
- Income-tax Act, 1961, section 44AA
- Income-tax Act, 2025, section 58
- Income-tax Act, 1961, section 44AB
Frequently asked questions
What is 44ADA in income tax?
A shortcut for resident professionals. Half of gross receipts is treated as profit, and no expense or depreciation claim is made against it.
What is the 44ADA of income tax act limit?
Gross receipts of ₹50 lakh for FY 2025-26. That ceiling becomes ₹75 lakh if no more than 5% of what you received came in cash.
Can a freelancer with foreign clients use section 44ADA of income tax?
Yes, if the work is a listed profession such as technical consultancy or information technology and the person is resident. Foreign fees received in a bank account count as non-cash receipts.
Do I need to keep books under 44ADA?
No, as long as you declare at least 50% of receipts as profit. If you declare less and your income is above the exemption limit, you need books and an audit.
Is there a lock-in under 44ADA like 44AD?
No. The five-year bar in 44AD(4) does not apply to 44ADA.