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Income Tax · BusinessSection 44ADA for professionals: eligibility and income computation
Doctors, lawyers, architects, engineers, consultants and many IT freelancers can declare 50% of gross receipts as income under Section 44ADA and skip books and audit. Here is who qualifies, the ₹75 lakh limit, and when actual profit is better.
Section 44ADA of the 1961 Act (part of Section 58 of the Income-tax Act, 2025) is the presumptive scheme for professionals. Instead of computing actual profit, the professional declares 50% of gross receipts (or more) as income.
Eligibility
| Condition | Rule |
|---|---|
| Person | Resident individual or partnership firm (not LLP) |
| Profession | Specified in Section 44AA(1) or notified: legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, film artists, company secretary, information technology, authorised representatives |
| Gross receipts | ≤ ₹50 lakh; ≤ ₹75 lakh if cash receipts ≤ 5% |
Information technology services – software development, IT consulting – are a notified profession, which brings many IT freelancers into 44ADA.
How income is computed
Presumptive income = 50% of gross receipts (or higher amount declared). All expenses, including depreciation, are deemed allowed. The written-down value of assets is computed as if depreciation had been claimed.
Worked example 1: doctor
Example: Dr Kaur runs a clinic in Rohini Sector 11. Gross receipts in FY 2025-26: ₹62 lakh, of which ₹2.5 lakh in cash (4%). Actual expenses (rent, staff, consumables): ₹21 lakh.
| 44ADA | Actual profit | |
|---|---|---|
| Income | 50% × ₹62 lakh = ₹31,00,000 | ₹62 lakh – ₹21 lakh = ₹41,00,000 |
| Eligible? | Yes – receipts within ₹75 lakh as cash ≤ 5% | — |
| Books / audit | Not required | Books required, and a tax audit because receipts exceed ₹50 lakh |
Under the actual method, receipts above ₹50 lakh would require a tax audit. 44ADA gives lower income (₹31 lakh vs ₹41 lakh) and no audit. Tax saving at 30% + cess on ₹10 lakh ≈ ₹3.12 lakh.
Worked example 2: when actual is better
Example: An architect with receipts of ₹40 lakh and genuine expenses of ₹26 lakh (staff, office, software) has actual profit of ₹14 lakh (35%). Declaring 50% under 44ADA means ₹20 lakh of income. If she declares the actual ₹14 lakh instead, she must maintain books and – because she is declaring less than the presumptive 50% with income above the basic exemption limit – get a tax audit. The tax saving on ₹6 lakh (about ₹1.87 lakh at 30% plus cess) is usually well above the cost of books and audit, so the actual method may suit her. The decision is a simple comparison of tax saved against compliance cost.
Advance tax
Pay the entire advance tax by 15 March. TDS under Section 194J (10%) on receipts from businesses counts towards it.
GST
Professionals must register under GST when aggregate turnover exceeds ₹20 lakh. Doctors' healthcare services are exempt from GST (so no registration for exempt services alone). Legal services by advocates to business entities are under reverse charge. See freelancer GST and tax.
Salaried professionals
A salaried person with side professional income can use 44ADA for the professional part. For example, a salaried engineer doing consulting can declare 50% of consulting receipts. See the freelancer guide.
ITR form
ITR-4 if total income ≤ ₹50 lakh and no disqualifying item (like directorship, foreign assets, capital gains other than small 112A); otherwise ITR-3.
Under the 2025 Act
From Tax Year 2026-27, the professional presumptive scheme is part of Section 58, with the same 50% rate and limits.
Common mistakes
- Using 44AD (6/8%) for a profession – not allowed.
- LLPs claiming 44ADA.
- Ignoring the 5% cash test for the ₹75 lakh limit.
- Declaring below 50% without books and audit.
- Forgetting advance tax by 15 March.
Key takeaway
For professionals with expenses below half their receipts, 44ADA is usually the cheapest and simplest route. Track cash receipts to keep the ₹75 lakh limit. Our income tax team helps doctors, lawyers, architects and consultants compare presumptive and actual methods each year.
Official references
Official sources to verify the current text, notifications and circulars:
Frequently asked questions
Which professions are covered by Section 44ADA?
Legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, and other notified professions such as film artists, company secretaries and information technology, as listed under Section 44AA(1).
What is the receipts limit for 44ADA?
₹50 lakh, increased to ₹75 lakh where cash receipts do not exceed 5% of total gross receipts.
Can an LLP use Section 44ADA?
No. Only resident individuals and partnership firms (other than LLPs) are eligible.
Is there a lock-in like 44AD?
No five-year lock-in applies to 44ADA. But if you declare less than 50% and your income exceeds the basic exemption limit, books and a tax audit are required.
Can a doctor with a hospital pharmacy use 44ADA?
Professional fees can be offered under 44ADA; pharmacy sales are business income and may use 44AD, subject to each scheme's limits.
Is 44ADA available to a non-resident professional?
No. 44ADA is available only to residents.
What is gross receipts for 44ADA?
Total professional receipts in the year, excluding GST collected and reimbursements billed at actuals (if separately identifiable).
This article is general information on the law as on 10 November 2026, written for educational purposes. It is not professional advice for your case. Section numbers under the Income-tax Act, 2025 should be confirmed with the official section mapping on the Income Tax Department website before use in filings.
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