Definition
Presumptive Taxation (44ADA)
Section 44ADA lets eligible professionals declare a fixed percentage of their gross receipts as income, simplifying tax filing without maintaining detailed books of accounts.
Section 44ADA offers a presumptive scheme for specified professionals (such as legal, medical, engineering, accountancy, technical consultancy and certain others) whose gross receipts are within a notified limit. They can declare a prescribed minimum percentage of receipts as profit and pay tax on that.
This removes the need to maintain detailed books and get audited, easing compliance for independent professionals and many freelancers who qualify. You can declare higher actual profit if applicable.
The scheme suits professionals with low expenses relative to receipts, since you are taxed on the deemed margin regardless of actual costs. Those with high genuine expenses might prefer regular taxation with full deduction of costs.
Related terms
- Freelancer GST RegistrationFreelancers and independent professionals in India must register for GST once their turnover crosses the applicable threshold or in certain cases like export of services.
- Advance Tax for FreelancersAdvance tax is income tax paid in instalments through the year rather than as a lump sum at filing; freelancers must pay it once their annual tax liability crosses a threshold.
- Salary vs Consultant TaxationA salaried employee and a consultant doing similar work are taxed differently: salary income has TDS and limited deductions, while consultancy income allows expense deduction or presumptive taxation.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.