What is Section 44ADA?
Section 44ADA is a simplified tax scheme for certain professionals like doctors, lawyers, architects, and consultants. Instead of maintaining detailed books and calculating every expense, you can declare 50% of your income as profit and pay tax on that.
It saves time, effort, and audit hassles for eligible professionals.
Who Can Use This Scheme?
The following can opt for Section 44ADA:
· Resident Individuals (like self-employed professionals)
· Partnership Firms (but not LLPs or companies)
What is the Turnover Limit?
Your gross receipts (total income before expenses) should be:
· Up to ₹50 lakhs, or
· Up to ₹75 lakhs if cash receipts are 5% or less of total receipts
💡 Non-account payee cheques and drafts are treated as cash — avoid those if you want to claim the ₹75 lakh limit.
Which Professions Are Allowed?
Only specific professions are eligible:
· Lawyers (Legal)
· Doctors (Medical)
· Engineers and Architects
· Chartered Accountants and Company Secretaries
· Technical consultants and IT professionals
· Interior decorators
· Film artists
· Authorized representatives (legal or tax-related)
If your profession is not listed above, you cannot opt for this scheme.
How Much Income is Taxed Under 44ADA?
You are taxed on 50% of your gross receipts.
If your total receipts are ₹40 lakhs, then ₹20 lakhs is considered your profit, and tax is calculated on that.
Can I Show Less Than 50% Profit?
Yes, you can declare lower profit. But if your total income crosses the taxable limit (currently ₹2.5 lakhs for individuals), then:
- You must maintain books of accounts
- You must get your accounts audited by a CA
Do I Need to Maintain Books or Do Audit?
No, not if:
· You accept the 50% income rule
· Your income is below the threshold and you don’t declare less than 50%
But if you show lower profit than 50% and your income exceeds the exemption limit, books and audit become mandatory.
Can I Claim Business Expenses Separately?
No. Under this scheme:
· All professional expenses (rent, salary, electricity, etc.) are already assumed
· No extra deductions are allowed
· Partnership firms can’t claim partner salary or interest separately
Do I Still Need to Pay Advance Tax?
Yes, but it's simpler. Instead of paying in four instalments, you can:
· Pay 100% of advance tax by March 15 of the financial year
Can I Still Claim Deductions Like 80C or 80D?
Yes! You can still claim deductions under Chapter VI-A, such as:
· 80C (LIC, PPF, ELSS)
· 80D (health insurance)
· 80G (donations)