Section 44ADA: the 50 percent rule for professionals and freelancers
If you are a professional with receipts under the limit, the law lets you treat half of what you receive as your income, with no books and no audit. For most consultants whose main expense is their own time, it is the single largest legal tax saving available.
Reviewed by Vijay Dhawan, Managing Partner, LexVerge LLP, on · Published
Quick answer
Section 44ADA lets a resident individual or resident partnership firm in a listed profession (legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, IT and other notified professions) declare 50% of gross receipts as income, without keeping books of account. It applies to receipts up to ₹50 lakh, or ₹75 lakh where cash receipts are within 5% of the total. LLPs, companies and non-residents cannot use it. Declaring less than 50% is allowed, but then books and a tax audit are needed if income exceeds the basic exemption.
Who can use it
- Who: a resident individual or a resident partnership firm. Limited liability partnerships, companies and non-residents cannot.
- What profession: those named in section 44AA(1): legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, and the notified professions, which are film artists, authorised representatives, company secretaries and information technology.
- How much: gross receipts of the year up to ₹50 lakh, or up to ₹75 lakh where not more than 5 percent of receipts came in cash.
Software developers, designers, consultants, doctors, lawyers, architects and chartered accountants in practice all fit. Traders, content creators whose activity is not a listed profession, and anyone running a business rather than a profession look to section 44AD instead, with its 6 or 8 percent of turnover; commission agents cannot use either scheme.
Presumptive or books? The free presumptive tax calculator compares the tax on both routes for 2026-27.
Working out the next instalment? The free advance tax calculator shows what is due by each date and any interest.
Paid late or short? See how interest under sections 423, 424 and 425 is worked out (the old 234A, 234B and 234C).
How the computation works
Income from the profession is taken as 50 percent of gross receipts, or a higher amount if you choose to declare it. No expenses are deducted from that figure, no depreciation is claimed, and the written-down value of assets is treated as if depreciation had been allowed. Deductions under Chapter VI-A, where the old regime is chosen, still apply against total income.
| Item | Consultant with ₹30 lakh of receipts |
|---|---|
| Presumptive income at 50% | ₹15,00,000 |
| Tax in the new regime, with cess | ₹1,09,200 |
| Effective rate on receipts | About 3.6% |
| Books of account, tax audit | Not required |
A professional in a partnership firm using 44ADA should note that the firm cannot deduct partners’ salary and interest from the presumptive income.
Filing, advance tax and GST
Return. ITR-4 (Sugam), provided total income is up to ₹50 lakh and none of the conditions that force a longer form apply; otherwise ITR-3 with the presumptive schedule. See our form guide. The due date is 31 August for ITR-4 filers without audit for AY 2026-27.
Advance tax. A single instalment by 15 March, instead of four; see our advance tax guide.
GST is separate. Presumptive income tax does not exempt anyone from GST. Registration is required once receipts cross ₹20 lakh a year (₹10 lakh in special category states). Services exported to overseas clients are zero-rated but still count towards the threshold, and need a letter of undertaking to be supplied without tax; see LUT filing.
TDS. Clients deduct 10 percent under section 194J from your fees; the credit appears in Form 26AS and is set off against the tax computed above, which often produces a refund.
When to opt out
The 50 percent rule is generous when real expenses are low and costly when they are high. A consultant who works from home with a laptop spends perhaps 10 to 15 percent of receipts and gains enormously. A doctor running a clinic with staff, rent and equipment, or an architect with a studio and draughtsmen, may genuinely spend 60 to 70 percent and would pay tax on income never earned.
You can declare income below 50 percent, but then, if total income exceeds the basic exemption, you must maintain books under section 44AA and have them audited under section 44AB, with the report due by 30 September (21 October 2026 for AY 2026-27). Unlike section 44AD, there is no five-year lock-in: a professional can use 44ADA in one year and regular computation in the next.
Opting in does not mean keeping nothing. Keep invoices, bank statements and a receipts register; the department can still ask you to prove that the receipts declared are the receipts earned, and GST and TDS data are matched against the return.
A note on the new Act
Income earned from 1 April 2026 is taxed under the Income-tax Act, 2025. The presumptive scheme for professionals continues there with the same limits and the same 50 percent rule under a new section number; returns for FY 2025-26 still cite section 44ADA.
Our business and freelancer ITR service tests 44ADA against the regular computation with your actual expenses before filing, from ₹1,199.
Frequently asked questions
What is the limit for section 44ADA?
Gross receipts up to ₹50 lakh, or ₹75 lakh where cash receipts are not more than 5 percent of the total.
Can a freelancer use section 44ADA?
Yes, if the work falls within a listed profession such as technical consultancy, information technology, engineering, architecture, accountancy, law or medicine, and the freelancer is a resident individual.
Can I declare less than 50 percent under 44ADA?
Yes, but if total income exceeds the basic exemption you must then maintain books of account and get a tax audit.
Is GST registration needed if I use 44ADA?
It depends on receipts, not on the income-tax scheme. Registration is required above ₹20 lakh a year, or ₹10 lakh in special category states.
Which ITR form is used for 44ADA?
ITR-4 where total income is up to ₹50 lakh and no disqualifying condition applies; otherwise ITR-3.
Can freelancers use presumptive tax under section 44ADA?
Yes, if the work falls within a specified profession: legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, or a profession notified by the CBDT, which includes film artists, company secretaries and information technology. Gross receipts must be within ₹50 lakh, or ₹75 lakh where cash receipts are 5% or less.
Which professions are covered under 44ADA?
Legal, medical, engineering, architectural, accountancy, technical consultancy and interior decoration, plus the professions notified by the CBDT: authorised representatives, film artists, company secretaries and information technology. A freelancer in any other line of work uses section 44AD instead, if eligible.
ITR for Business and Freelancers from ₹1,199, by a CA.
P&L, presumptive-scheme evaluation and advance tax, filed by a CA.
Professional fee shown; government charges at actuals, quoted in writing before you pay. GST at 18% extra.
See what is included and the full price44ADA or regular books? We compute both
Presumptive and actual-expense results compared, ITR-4 or ITR-3 filed by a CA. From ₹1,499.
Keep reading.
Tax for freelancers in India
Freelancer tax in India for 2026-27: the 50% presumptive rule, advance tax, TDS by clients, GST registration at ₹20 lakh and export of services.
Read guide→GuideITR-4 (Sugam) for AY 2026-27: who can file and how
ITR-4 is the short return for presumptive business and professional income up to ₹50 lakh. Who can and cannot use it, the AY 2026-27 change to two house properties, and the dates.
Read guide→GuideSection 44AD presumptive taxation
Declare 8% or 6% of turnover and skip the books: limits, exclusions, the five-year rule, advance tax and ITR-4.
Read guide→Official references
The statutory sources behind this page. We keep our guidance aligned to them: verify anything time-sensitive directly.
- Ministry of Corporate AffairsCompanies Act filings, forms and fee schedules
- Income Tax DepartmentReturns, forms, rates and e-filing utilities
- GST PortalRegistration, returns and rate notifications
Facts on this page are checked against these sources; the date of the last check is shown at the top of the page. It is general guidance, not advice on your specific facts. How we write and check our guides.