Section 44ADA of Income Tax - Presumptive Taxation Scheme for Professionals
Presumptive taxation scheme for small notified professionals having gross receipts upto Rs.50 lakhs
Under Income Tax, for persons carrying on business/profession, it is mandatory to maintain books of accounts in certain circumstances.
To provide relief from the tedious work of maintaining books of accounts for small professionals, Section 44ADA has been inserted i.e. scheme of taxation of small professions under presumptive taxation.
We will look at every aspect of this scheme u/s 44ADA here.
1 Who can avail of this scheme Section 44ADA?
The presumptive taxation scheme u/s 44ADA can be availed by the following categories of persons only -
(a) Resident Individual
(b) Resident Partnership Firm
Thus, a non-resident and any person other than those mentioned above i.e. LLP, companies, etc. are not allowed to adopt this scheme.
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2 What type of professions are allowed to avail of this scheme -
There are certain categories of professionals only who are allowed to avail of this scheme. These are the professions mentioned u/s 44AA(1) of the Income Tax as under :
(a) Legal
(b) Medical
(c) Engineering or Architectural
(d) Accountancy
(e) Technical Consultancy
(f) Interior Decoration
(g) Any other Profession as notified by CBDT in the Official Gazette
3 How the Income is calculated under this Scheme?
Any eligible person carrying on an eligible profession is required to declare 50% of gross receipts as net Income under this scheme.
However, the gross receipts should not exceed Rs.50 lakhs [Rs. 75 lakhs from the A.Yr.2025-26] i.e. this scheme applies to the eligible professionals having gross receipts upto Rs. 50 lakhs only.[Rs.75 lakhs from the A.Yr.2025-26]
By doing so, the person is not required to maintain any books of accounts as prescribed u/s 44AA of the Income Tax Act.
However, if the actual income is higher than 50% of gross receipts, then the higher actual income is required to be shown.
4 Consequences for not adopting presumptive Scheme?
Any person who is not desirous of adopting a presumptive scheme i.e. person having gross receipts less than Rs.50 lakhs and declaring income less than 50% of gross receipts, will have to get his books of accounts audited u/s 44AB and all the provisions of tax audit will apply in his case.
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