Presumptive Taxation — FAQs

Presumptive Taxation FAQs – 44AD 44ADA 44AE (India)

Explore presumptive taxation FAQs for small businesses, professionals and goods carriage owners. Covering eligibility, turnover limits and digital-receipt rate, books of account (44AA), audit (44AB), advance tax, opting in/out consequences [44AD(4)/(5)], ITR forms, and more than 10 vehicles rule—kept current and updated as per Finance Act 2025.

FAQs on Tax on Presumptive Taxation Scheme

It’s a simplified method to compute business or professional income where tax is calculated on a deemed profit instead of maintaining detailed books and claiming every expense. In India this is covered mainly by Section 44AD (small businesses), Section 44ADA (specified professionals) and Section 44AE (goods carriages).

Resident individuals, HUFs and partnership firms (not LLPs) carrying on eligible business can opt if their turnover/gross receipts do not exceed the threshold for the year. Income is declared at a deemed percentage of turnover (see Q8). Companies and LLPs cannot use 44AD.

Not eligible: persons carrying on profession under Section 44AA(1) (they should see 44ADA), persons earning commission or brokerage, agency business, and business of plying, hiring or leasing goods carriages (covered by 44AE). Non-residents also cannot use 44AD.

No. Income of an insurance agent is commission income, which is specifically excluded from 44AD.

No. Specified professionals (e.g., legal, medical, engineering, accountancy, architecture, technical consultancy, interior decoration, etc.) should refer to Section 44ADA.

No. If turnover/gross receipts exceed the threshold, 44AD is not available. Compute income under the normal provisions (see next Q).

Prepare a regular profit & loss account, allow revenue expenses and depreciation, disallow personal/non-business items, then offer the net profit to tax. You must maintain books of account (44AA) and may require audit (44AB) based on turnover and conditions.

Declare a deemed profit on turnover/gross receipts at the statutory rate (commonly understood as 8%, or 6% for amounts received by non-cash/digital mode within the prescribed window). No further business-expense deduction is allowed; Chapter VI-A deductions may still apply.

No books are required under 44AA if you declare at least the deemed profit. If you declare lower than the deemed rate and your total income exceeds the basic exemption, you must keep books and get audit under 44AB.

Yes. Advance tax is payable; for 44AD it is typically one installment (100%) by 15 March of the financial year. Any shortfall can be paid as self-assessment tax before filing the ITR.

If you opt out after opting in, you cannot claim 44AD again for the next five assessment years. During that lock-in, you must maintain books (44AA) and may need audit (44AB) if conditions are met.

Specified professionals (Section 44AA(1))—like doctors, lawyers, architects, accountants, engineers, etc.—with gross receipts up to the threshold can declare 50% of gross receipts as presumptive income.

No. Once you declare 50% as income, no additional business expense is allowed. If you want to declare less than 50% and your total income exceeds the basic exemption, you must maintain books and get audit (44AB).

Yes. Advance tax provisions apply to professionals under 44ADA as well; pay according to the Act’s schedule.

For taxpayers engaged in the business of plying, hiring or leasing goods carriages who own not more than 10 goods vehicles at any time during the year.

Individuals, HUFs, firms, companies, etc., carrying on the goods carriage business with ≤10 vehicles can use 44AE. The scheme applies per vehicle for the period owned.

No. Owning more than 10 goods vehicles at any time during the year makes 44AE inapplicable. Use normal provisions.

Presumptive income is computed per vehicle per month (or part thereof). As per the law cited in your source, it may be ₹7,500 per goods vehicle per month or ₹1,000 per ton of gross vehicle weight per month (for heavy vehicles), as prescribed.

Books are not required if you offer presumptive income as per 44AE. If you claim a lower income than the presumptive figure and total income exceeds the basic exemption, you must maintain books and get audit as applicable.

Yes. Business under 44AE is also subject to advance tax provisions. Pay within the due dates to avoid interest.

Practical tips before you choose presumptive taxation (44AD · 44ADA · 44AE)

  • Check the threshold first. If your turnover/receipts exceed the limit, 44AD/44ADA is not available for that year; use normal provisions.
  • Digital receipts can help. Under 44AD, eligible non-cash receipts within the prescribed window may qualify for the 6% rate. Keep proofs of mode and date.
  • Books aren’t always “zero.” Even on presumptive, keep basic records: invoices, bank statements, receipt logs, and vehicle ownership/fitness (44AE). They protect you during verification.
  • Audit trigger still exists. If you declare lower than deemed profit and your total income exceeds the basic exemption limit, maintain books (44AA) and get audit (44AB).
  • Mind the lock-in. Opting out of 44AD after opting in typically blocks you from using 44AD again for the next five assessment years.
  • Advance tax still applies. Pay advance tax on time (for 44AD it’s generally one installment by 15 March); shortfalls attract interest.
  • No extra business expenses. Once you choose presumptive, you can’t deduct additional business expenses. You may still claim Chapter VI-A deductions (80C, 80D, 80G, etc.) if otherwise eligible.
  • Vehicles count matters (44AE). Not more than 10 goods vehicles owned at any time in the year; more than that → 44AE not available.
  • Choosing a regime. Your old vs new tax regime choice can change the final tax—run both scenarios if you have significant deductions.

What records should I keep even on presumptive taxation?

  • Sales/receipts register (cash & digital), purchase bills and major expense proofs
  • Bank statements and UPI/card settlement reports
  • E-way bills, GST summaries (if applicable)
  • Fixed-asset invoices (for capital gains/depreciation tracking later)
  • For 44AE: vehicle RC copies, fitness/permit/insurance, ownership dates, and weight class

When presumptive Income may not be the right fit

  • Thin margins but high input costs (normal provisions could yield lower tax)
  • You expect large Chapter VI-A deductions that are only valuable in the old regime
  • You need to carry forward business losses in a particular year
  • You plan to bid for loans/tenders that prefer detailed audited financials

Next steps

  • See the Income Tax FAQs hub for more categories.
  • Need the basics? Visit Computation of Tax — FAQs for heads of income, GTI vs Total, rebate 87A, surcharge and marginal relief.
  • Filing time? Check our upcoming pages: TDS/TCS FAQs, AIS/TIS FAQs, and a step-by-step ITR guide.

Last updated: Oct,2025. Tax thresholds/rates change; if something looks off or you need a scenario added, send us a note and we’ll update quickly.

Source

Incometaxindia.gov.in

Disclaimer: The information on this page is for general guidance only and is not tax, legal or professional advice. Laws and thresholds change, and application depends on your facts. While we aim to keep content current (Finance Act, 2025), errors or omissions may occur. Always refer to the Income-tax Act/Rules, CBDT notifications/circulars and consult a qualified advisor. If there is any conflict with the law, the official provisions prevail. TaxBizMantra and the authors accept no liability for actions taken or not taken based on this material; examples are illustrative and do not create a client–advisor relationship.