Presumptive tax under section 44AD, 44ADA and 44AE explained

Presumptive tax lets a small taxpayer show a fixed share of turnover as income, instead of keeping detailed books. Under section 44AD, a resident business with turnover up to ₹2 crore (₹3 crore if cash received is 5% or less) shows 8% of turnover as income, or 6% of what is received digitally. Under section 44ADA, a resident professional with receipts up to ₹50 lakh (₹75 lakh with the same cash test) shows 50%. Section 44AE covers owners of up to 10 goods vehicles.

44AD, 44ADA and 44AE at a glance (AY 2026-27)

In each scheme, you can show a higher income if you earned more.

What is presumptive tax?

In normal business accounts, you work out profit as income minus expenses, and you keep books to prove it. Under a presumptive taxation scheme, the law presumes your profit is a fixed share of your turnover or receipts. You show that amount as income and pay tax on it.

• No books of account are needed under section 44AA.
• No tax audit under section 44AB, as long as you show at least the presumptive income.
• No expense claims. Your business expenses and depreciation are treated as already allowed inside the fixed percentage. You cannot claim them again.

There is no separate presumptive tax rate. The 8%, 6% or 50% only fixes your income. Tax is then worked out on your total income at the normal rates that apply to you. You can estimate it with our income tax calculator.

Section 44AD: who can use it

Section 44AD is for a business run by a:

• resident individual,
• resident Hindu undivided family (HUF), or
• resident partnership firm, but not a limited liability partnership (LLP).

It covers any business, except:

• plying, hiring or leasing goods carriages (that is section 44AE),
• a profession listed in section 44AA(1), such as legal, medical or accountancy work (professionals look at section 44ADA instead),
• income in the nature of commission or brokerage,
• any agency business.

You also cannot use 44AD for a year in which you claim a deduction under sections 10A, 10AA, 10B or 10BA, or a deduction under the Chapter VIA heading "C. Deductions in respect of certain incomes".

Non-residents cannot use 44AD.

Section 44AD limit: ₹2 crore or ₹3 crore

This limit has applied since AY 2024-25, so it is the same for AY 2026-27. The 5% test counts only cash received. Cash you pay out does not count here. (The tax audit test in section 44AB is different: it looks at cash received and cash paid.)

Example. A trader has turnover of ₹2.6 crore.

• If ₹10 lakh of it came in cash, that is about 3.8%. The limit is ₹3 crore, so the trader can use 44AD.
• If ₹15 lakh came in cash, that is about 5.8%. The limit is ₹2 crore, so the trader cannot use 44AD for that year.

44AD income: 8% or 6% of turnover

Under section 44AD, your income is at least:

• 6% of the turnover you receive by account payee cheque, account payee bank draft, bank electronic clearing system, or another prescribed electronic mode, and
• 8% of the rest (cash and any other mode).

The prescribed electronic modes are credit card, debit card, net banking, IMPS, UPI, RTGS, NEFT and BHIM Aadhaar Pay. A digital payment counts for 6% if you receive it during the year or before the return due date under section 139(1).

Example. A shop has turnover of ₹80 lakh. ₹60 lakh came by UPI, card and bank transfer. ₹20 lakh came in cash.

The shop owner shows at least ₹5.2 lakh as business income. Tax is then worked out on total income at normal rates.

The 44AD five-year rule

If you show income under 44AD for a year, you are expected to stay with it.

• If, in any of the next five years, you show a profit that is not in line with 44AD (for example, less than 8% or 6%), you cannot use 44AD for the five years after that year.
• From the year you leave, if your total income is above the exemption limit, you must keep books of account under section 44AA and get a tax audit under section 44AB.

So before you leave 44AD to show a lower profit, check the effect on the next five years. A tax audit also changes your due date (see below). Our tax audit guide explains the audit rules.

The department's presumptive tax page describes this five-year rule for section 44AD only.

Section 44ADA: who can use it

Section 44ADA is for a resident individual or a resident partnership firm (not an LLP) in one of these professions:

• legal
• medical
• engineering or architectural
• accountancy
• technical consultancy
• interior decoration
• any other profession notified by the CBDT, such as company secretaries in practice and information technology professionals.

An HUF cannot use 44ADA. If your work is not on this list, 44ADA does not apply to it; check with a chartered accountant before you use it.

Section 44ADA limit and the 50% income

Your income under 44ADA is 50% of gross receipts, or more if you earned more. The ₹75 lakh limit has applied since AY 2024-25.

How to calculate presumptive income under 44ADA:

In the last case, the doctor's receipts are above ₹50 lakh, so the normal rules apply, including a tax audit under section 44AB (the audit limit for a profession is ₹50 lakh). For more on filing as a professional, see ITR filing for professionals.

Showing less than 50%. You can show income below 50% of receipts. But if you do, and your total income is above the exemption limit, you must keep books of account under section 44AA and get a tax audit under section 44AB.

44AD vs 44ADA: the difference

A professional listed in section 44AA(1) cannot use 44AD for that profession. And 44ADA does not cover a business. So the question is not which one you prefer: your work decides it.

Section 44AE: goods vehicles

Section 44AE is for the business of plying, hiring or leasing goods carriages. Any person can use it, including a company, if they do not own more than 10 goods vehicles at any time during the year.

Part of a month counts as a full month. You can show more if you earned more.

Example. A transporter owns two trucks, each with a gross vehicle weight of 16,000 kg (16 tons), for the whole year. On 20 August 2025, the transporter buys a small goods van (gross vehicle weight 12,000 kg or less).

Under 44AE, no further expenses are allowed. A partnership firm can still deduct remuneration and interest paid to partners, worked out as the Act allows. If you show less than the presumptive income, you must keep books and get a tax audit. There is no special advance tax rule for 44AE; the normal instalments apply.

Books, tax audit and advance tax

Is a balance sheet required for 44AD? No full balance sheet is needed. But ITR-4 asks for a few financial details of the business, such as sundry debtors, sundry creditors, inventory and cash in hand. Keep these figures ready.

Which ITR form, and the due date

In ITR-4, the 44AD part asks you to split turnover into money received by cheque, draft or bank electronic clearing; cash; and any other mode. The 6% and 8% are applied from there. The form also asks for your GSTIN and the turnover shown in your GST returns, if you are registered. Make sure the two figures can be explained.

Not sure which form fits your full income? Read which ITR form to file.

Due date for AY 2026-27:

As of 29 September 2026: on 28 September 2026 the CBDT announced that the return due date for audit cases (not transfer pricing cases) moves to 21 November 2026. The formal order was to follow.

If you missed 31 August 2026, you can still file a belated return until 31 December 2026, with a late fee. See our belated return and late fee guide.

Is presumptive tax right for you? Points to weigh

• Your real profit. If your real profit is at or above 8% or 6% (44AD) or 50% (44ADA), presumptive tax saves you bookkeeping and audit. If your real profit is lower, you pay tax on more than you earned, unless you keep books and, where the rules require it, get an audit.
• The five-year rule (44AD). Leaving 44AD to show a lower profit can shut you out of 44AD for five years.
• Advance tax in one go. Under 44AD and 44ADA, the whole advance tax is due by 15 March.
• No expense claims. Rent, salaries and depreciation are treated as already covered in the fixed share.
• Who you are. An LLP, a non-resident, or a person earning commission or running an agency business cannot use 44AD. An HUF cannot use 44ADA.

These are general points, not advice on your case. Run your own numbers, or ask a chartered accountant, before you choose.

Which law applies?

Returns for FY 2025-26 (AY 2026-27) are filed under the Income-tax Act, 1961. That is why this page uses sections 44AD, 44ADA and 44AE. The Income-tax Act, 2025 applies from tax year 2026-27 (returns filed in 2027). In the new Act, these schemes sit in section 58. Check the new rules before you use this page for tax year 2026-27.

Need help with presumptive income?

We file returns with presumptive income under section 44AD or 44ADA for ₹1,149 + GST.

See all plans on our ITR filing plans page, or read about ITR filing for business owners.

• A chartered accountant checks every return before it is filed.
• If your income falls under two plans, you pay only for the higher plan.
• Help with e-verification is included.

Not sure whether presumptive tax suits you? Our presumptive tax advisory service looks at your numbers before we file. If you need an audit, see our tax audit service.

Frequently asked questions