Section 44ADA: the 50 percent rule for professionals and freelancers

• 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, agents earning commission, 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.

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.

A professional in a partnership firm using 44ADA should note that the firm cannot deduct partners’ salary and interest from the presumptive income.

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.

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. 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.

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 ₹1,499.