Freelancers & Creators
Presumptive taxation under 44AD and 44ADA, simply
How presumptive taxation lets freelancers and small businesses declare a fixed share of receipts as profit.
By Pooja Agarwal4 min read
Keeping full books of account, tracking depreciation and filing a long ITR-3 is a lot to ask of a solo freelancer. Presumptive taxation offers a shortcut: declare a fixed percentage of your receipts as profit, pay tax on that, and skip detailed expense accounting. For FY 2025-26 (AY 2026-27) there are two main schemes for individuals — section 44ADA for professionals and section 44AD for businesses.
Section 44ADA: for specified professionals
44ADA is open to resident individuals in the professions listed under section 44AA: legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, film artists, company secretaries, information technology and authorised representatives.
- Limit: gross receipts up to ₹50 lakh, rising to ₹75 lakh if cash receipts are no more than 5% of the total.
- Deemed profit: 50% of gross receipts. You can declare more if your actual profit is higher, but not less.
Most software developers, designers working in IT, consultants and similar professionals look here first.
Section 44AD: for small businesses
44AD covers eligible businesses run by resident individuals, HUFs and firms (not LLPs).
- Limit: turnover up to ₹2 crore, or ₹3 crore if cash receipts are no more than 5%.
- Deemed profit: 6% of receipts through banking or digital channels, 8% of cash receipts.
There is a lock-in to respect. If you opt for 44AD and then drop out within five years by declaring lower profit, you cannot use 44AD again for the following five years.
Example: a developer under 44ADA
Rohan, a freelance developer, receives ₹30,00,000 in FY 2025-26, all by bank transfer. Under 44ADA his deemed profit is 50%, or ₹15,00,000. He has no other income and stays in the new regime.
- ₹4–8 lakh at 5%: ₹20,000
- ₹8–12 lakh at 10%: ₹40,000
- ₹12–15 lakh at 15%: ₹45,000
- Tax ₹1,05,000 + 4% cess ₹4,200 = ₹1,09,200
If his real expenses — laptop, software, co-working, internet — are well under ₹15 lakh, presumptive tax costs him nothing extra and saves a great deal of bookkeeping. If his actual expenses were higher than 50%, regular books under ITR-3 might produce a lower tax.
Example: a small online seller under 44AD
Farah runs a home décor business with turnover of ₹1,20,00,000: ₹1,00,00,000 through UPI and bank transfers and ₹20,00,000 in cash. Because cash is more than 5%, the ₹2 crore limit applies, and she is within it.
- 6% of ₹1,00,00,000 = ₹6,00,000
- 8% of ₹20,00,000 = ₹1,60,000
- Deemed profit: ₹7,60,000
Under the new regime that income is below ₹12 lakh, so after the section 87A rebate her income tax is nil. Moving more customers to digital payments would lower her deemed profit further.
What presumptive tax does and does not change
- Advance tax: the whole year’s amount is due in one instalment by 15 March, instead of four.
- Return form: ITR-4 (Sugam) if total income is up to ₹50 lakh; otherwise a fuller form.
- Books: you are spared detailed books for the scheme, though keeping invoices and bank statements remains essential.
- GST: presumptive income tax has no bearing on GST registration, which depends on turnover thresholds.
- Regime: you still choose between old and new. With business income, leaving the new regime needs Form 10-IEA before the due date, and you can switch back only once.
Are creators “professionals”?
Whether a YouTuber, influencer or content creator fits one of the specified professions for 44ADA is not clear-cut. Many creators file under 44AD as a business, and others keep regular books. The right answer depends on what you actually do and how you earn it, so get a CA’s view before you choose — the percentage difference (6–8% versus 50%) is large.
Choosing in practice
- Check eligibility: profession or business, and receipts within the limit.
- Estimate your real expense ratio for the year.
- If real profit is at or above the deemed rate, presumptive is usually simpler and no costlier.
- If real expenses are much higher, compare with regular books.
- For 44AD, think about the five-year lock-in before opting in.
Section numbers here are from the Income-tax Act, 1961; the Income-tax Act, 2025 renumbers them from the 2026-27 tax year.
General information, not tax advice. Rules change, so check the latest rules or speak to a CA before you act.