presumptive income under section 44ad

Presumptive Income under section 44ada

Presumptive Income - Eligibility, rate and documents required

What is Presumptive Income?

The Presumptive Taxation System (PTS) bases income calculations on expected rather than actual income.The reason is that you deduct company costs from enterprise profits and pay balance tax. Let’s discuss this further, any corporation or business with a turnover of up to 1 crore may benefit from the presumptive scheme. Presumptive tax means that a person’s income is believed to be a certain amount regardless of their actual income.

Benefits of Presumptive Income Tax Scheme

Following are the main advantages of Presumptive Taxation for professionals:

Easy filing procedure

Compared to other ITR forms, the tax filing process is really quick and simple. Additionally, it decreases the chances of making any mistakes to a great extent since it saves a lot of time and energy.

Decrease in tax liability

In most cases, professionals do not need to declare substantial amounts of expenses. Nevertheless, one can save on taxes by declaring 50% of the earnings as a profit and the rest as expenses.

Scope of money-saving

Individuals file their own income tax returns because the process is simple and hassle-free.

As a result, people are no longer required to seek the advice of professional tax consultants.

A tax consultant can charge taxpayers from Rs. 5000 to Rs. 15000 for filing income taxes.

Eligibility criteria for Presumptive Income

  • Businesses with an annual turnover of less than 2 crores and an income of more than 8%.
  • Professionals and freelancers with gross receipts less than Rs 50 lakh per year whose income is set at 50% or more.
  • Also for individuals with a special source of income.

Rate of Presumptive Tax under section 44ADA

During a given financial year, income covered under section 44ADA is 50% of gross earnings from a profession.

It is important to note that such a figure was calculated based on the assumption that professionals incur relatively low expenditures when compared to business owners

In addition, eligible professionals can declare expenses over 50% of their total receipts if necessary.

Required documents for filing Presumptive Income Tax

  • Bank statements for the financial year
  • Statements of income and expenses
  • Gross Receipts
  • Statement of Tax Credit on Form 26AS
  • If the interest exceeds Rs. 10,000, a bank statement is necessary.

Provision for Salaried Individual

In order to generate additional income, salaried individuals often freelance. 

In such cases, the gross income earned during a financial year is determined by adding the salary income with the earnings from freelancing activities. As a result, the total will be taxed according to their applicable tax slab rate.

For instance, if Raj earns a salary income of Rs.20 lakh and a freelance income of Rs.10 lakh, he can elect the presumptive taxation option.

Raj can only increase his overall salary by half what he makes as a freelancer.

His annual income will be Rs. 25 lakh if he does this. It must be mentioned that Raj must use ITR-4 to file income tax returns in this situation.


You cannot do so. section 44AD favours only partnership firms that are not Limited Liability Partnerships.

if you wish to take benefit of the Presumptive Taxation Scheme, your turnover cannot exceed Rs. 1 crore.

No, you do not have to pay advance taxes if you are taking advantage of section 44AD.

We have reached the end of our post on Presumptive Income Tax. Post your thoughts and opinions in the comments box below.