Presumptive Tax Calculator — Section 44AD & 44ADA

Quick answer

Under Section 44AD, an eligible small business can declare 6% of receipts received through bank, UPI or card and 8% of cash receipts as its profit, without keeping detailed books. Under Section 44ADA, an eligible professional declares 50% of gross receipts as profit. The limits are ₹3 crore for 44AD and ₹75 lakh for 44ADA when cash receipts stay within 5% of the total. Tax is then charged at normal slab rates.

What presumptive taxation actually means

Normally, a business works out its profit by keeping full books of account: every sale, every purchase, every expense, depreciation on assets and a closing balance sheet. That needs an accountant through the year and, above certain limits, a tax audit. Presumptive taxation is a simpler route that the Income-tax Act offers to small businesses and certain professionals.

Instead of proving actual profit, you accept a fixed percentage of your receipts as your income. The law "presumes" that your profit is at least that much. You do not have to show expenses separately, and the department does not ask you to justify them, because the presumed rate already includes them.

There are two main schemes for individuals. Section 44AD is for businesses such as shops, traders, manufacturers, contractors and small service businesses. Section 44ADA is for specified professionals such as doctors, lawyers, chartered accountants, engineers, architects, interior designers and technical consultants. A third scheme, Section 44AE, covers people who own goods carriages, and it works on a per-vehicle basis, so it is not part of this calculator.

The presumptive tax calculator on this page shows the income you would declare under 44AD or 44ADA and the tax on it, so you can see in a few seconds whether the scheme suits you.

How to use this presumptive tax calculator

The calculator has four inputs. Here is what each one means and how to fill it correctly.

1. You are a — choose Business (44AD) if you trade, manufacture, run a shop, do contract work or provide a service that is not one of the listed professions. Choose Professional (44ADA) if you are a doctor, CA, lawyer, engineer, architect, consultant or a freelancer in a notified profession.
2. Receipts by bank / UPI / card — the total amount you received during the financial year through account-payee cheque, bank draft, NEFT, RTGS, IMPS, UPI, debit or credit card and other electronic modes. Use the gross amount received from customers, not the amount left after expenses.
3. Receipts in cash — everything you received in cash during the year. Be honest here: the cash figure decides both the profit rate under 44AD and which turnover limit applies to you.
4. Financial year — choose the year you are calculating for. The tax slabs used are the ones loaded for that year on this site.

The result shows your total receipts, the rate applied, the income you would declare and the tax plus cess. If your receipts cross the limit for the scheme, a warning appears telling you that regular books, and possibly an audit, are needed instead.

What the calculator assumes

To keep the answer quick, the calculator assumes three things. First, the tax is worked out under the new regime, which is the default regime now. Second, it assumes you have no other income such as salary, rent, interest or capital gains. Third, it treats you as below 60 years of age. If any of these is not true for you, treat the result as the tax on your business income alone and use the full income tax calculator to add your other income and compare regimes.

The formula behind the calculation

Section 44AD (business)

Presumptive income = 6% of digital receipts + 8% of cash receipts.

The lower 6% rate applies only to receipts that come through an account-payee cheque, account-payee bank draft, the bank's electronic clearing system or other prescribed electronic modes. The receipt should come in during the year or, at the latest, before the due date for filing your return. Everything else counts as cash and is taxed at 8%.

Section 44ADA (profession)

Presumptive income = 50% of gross receipts.

There is no separate rate for cash and digital receipts under 44ADA. The mode of receipt matters only for deciding whether you get the higher ₹75 lakh limit.

The 5% cash test

Both schemes have a higher limit if your cash receipts are not more than 5% of total receipts. The calculator checks this automatically: it divides your cash receipts by your total receipts and picks the limit. If cash is ₹5 lakh out of ₹1 crore, that is exactly 5% and you still qualify for the higher limit. If cash is ₹5.1 lakh, you do not.

From income to tax

Once the presumptive income is known, it is added to your total income and taxed at normal slab rates. There is no special flat rate for presumptive income. In the new regime, the slabs are nil up to ₹4 lakh, 5% from ₹4 to 8 lakh, 10% from ₹8 to 12 lakh, 15% from ₹12 to 16 lakh, 20% from ₹16 to 20 lakh, 25% from ₹20 to 24 lakh and 30% above ₹24 lakh. Health and education cess of 4% is added on top. The rebate under Section 87A, up to ₹60,000, wipes out the tax fully if your taxable income is ₹12 lakh or less.

Note that the ₹75,000 standard deduction is only for salary and pension income. It does not reduce business or professional income, so the calculator does not apply it here.

Rates and limits at a glance

From tax year 2026-27, the new Income-tax Act, 2025 renumbers these sections. This page and the calculator use the familiar numbers (44AD, 44ADA, 87A) and the rates shown above.

Worked examples with real numbers

Example 1: A kirana and general store

Sunita runs a general store in Ghaziabad. In the year she received ₹1.5 crore through UPI and cards and ₹20 lakh in cash. Total receipts are ₹1.7 crore.

• Cash share: ₹20 lakh ÷ ₹1.7 crore = 11.76%. That is above 5%, so her limit is ₹2 crore. She is within it.
• 6% of ₹1.5 crore = ₹9,00,000.
• 8% of ₹20 lakh = ₹1,60,000.
• Presumptive income = ₹10,60,000.
• Tax on slabs: 5% of ₹4 lakh (₹20,000) + 10% of ₹2.6 lakh (₹26,000) = ₹46,000.
• Rebate under 87A: ₹46,000, because income is below ₹12 lakh.
• Tax payable: nil.

Even with a turnover of ₹1.7 crore, Sunita pays no tax if she has no other income. She still must file her return, because her income is above the basic exemption limit.

Example 2: A wholesale trader with mostly digital receipts

Rakesh is a wholesale trader who received ₹2.6 crore through bank transfers and ₹10 lakh in cash. Total receipts are ₹2.7 crore.

• Cash share: ₹10 lakh ÷ ₹2.7 crore = 3.7%. That is within 5%, so the ₹3 crore limit applies.
• 6% of ₹2.6 crore = ₹15,60,000.
• 8% of ₹10 lakh = ₹80,000.
• Presumptive income = ₹16,40,000.
• Tax on slabs: ₹20,000 (4–8 lakh) + ₹40,000 (8–12 lakh) + ₹60,000 (12–16 lakh) + ₹8,000 (20% on ₹40,000) = ₹1,28,000.
• No rebate, because income is above ₹12 lakh.
• Cess at 4% = ₹5,120.
• Total tax = ₹1,33,120.

If Rakesh had taken ₹4 lakh more in cash, his cash share would have crossed 5% and his limit would have dropped to ₹2 crore. With ₹2.7 crore of receipts, he would then be outside 44AD altogether. That is why the cash figure matters so much.

Example 3: A freelance software consultant

Ankit is an IT consultant who received ₹40 lakh from clients, all by bank transfer.

• He is a professional, so 44ADA applies, and with no cash his limit is ₹75 lakh.
• Presumptive income = 50% of ₹40 lakh = ₹20,00,000.
• Tax on slabs: ₹20,000 + ₹40,000 + ₹60,000 + ₹80,000 = ₹2,00,000.
• Cess at 4% = ₹8,000.
• Total tax = ₹2,08,000.

Ankit does not need to show what he spent on his laptop, internet, co-working space or travel. The 50% deemed expense covers all of it.

Example 4: A doctor who crosses the limit

Dr. Mehra received ₹70 lakh through bank and card, and ₹5 lakh in cash from patients. Total receipts are ₹75 lakh.

• Cash share: ₹5 lakh ÷ ₹75 lakh = 6.67%. That is above 5%, so her limit is only ₹50 lakh.
• Receipts of ₹75 lakh exceed ₹50 lakh, so 44ADA is not available.
• The calculator shows a warning. She has to maintain books of account and will usually need a tax audit.

Had she kept cash receipts to ₹3.75 lakh or less (5% of ₹75 lakh), she could have used the ₹75 lakh limit and declared 50% as income under 44ADA.

Example 5: A cash-heavy shop just over the limit

Imran runs a hardware shop that received ₹1.8 crore digitally and ₹40 lakh in cash, a total of ₹2.2 crore. His cash share is 18.2%, so his limit is ₹2 crore, and his receipts are above it. If he could use 44AD, his presumptive income would be ₹10.8 lakh + ₹3.2 lakh = ₹14 lakh, with tax of ₹93,600 including cess. But because he has crossed the ₹2 crore limit, the calculator flags that he needs regular books. Moving more customers to UPI and card payments would bring his cash share down and could, in a later year, make the ₹3 crore limit available again.

Who can use 44AD and 44ADA

Section 44AD: eligible businesses

Section 44AD is open to a resident individual, a Hindu Undivided Family and a partnership firm. A limited liability partnership (LLP) and a company cannot use it. A non-resident cannot use it either.

Even an eligible person cannot use 44AD for certain kinds of income:

• Income from the professions listed in Section 44AA(1). Those fall under 44ADA instead.
• Income by way of commission or brokerage.
• Income from any agency business.
• The business of plying, hiring or leasing goods carriages, which has its own scheme under Section 44AE.
• A person who has claimed certain profit-linked deductions for that business, as specified in the section.

Common examples of businesses that do use 44AD include retail shops, wholesale traders, small manufacturers, civil contractors, restaurants, tailoring units, coaching centres run as a business, travel agents who earn on sales (not pure commission) and small online sellers.

Section 44ADA: specified professions

Section 44ADA is for a resident individual or a partnership firm (not an LLP) carrying on a profession listed in Section 44AA(1). These are legal, medical, engineering, architectural, accountancy, technical consultancy and interior decoration, along with professions notified by the government. The notified list includes authorised representatives, film artists, company secretaries and information technology.

Many freelancers fit here, such as software developers, IT consultants and designers working in technical fields. Whether a particular freelance activity counts as a "specified profession" is sometimes a judgement call. For example, a content writer or a social media manager may not clearly fall in the list. If your work is not a listed profession, you may still be able to use 44AD as a business, at 6% or 8% instead of 50%. When in doubt, get it checked before filing, because choosing the wrong section can lead to a defective return notice.

Special cases you should know

Declaring a higher profit

The rates are the minimum. You are free to declare a higher income than 6%, 8% or 50%. Many people do this when their actual margin is clearly higher, or when they want their declared income to support a loan or visa application. The extra income is taxed at the same slab rates.

Declaring a lower profit

If your actual profit is lower than the deemed rate, you can declare it, but then you step out of the presumptive scheme. You must keep books of account and, if your income is above the basic exemption limit, get them audited. For 44AD there is an extra consequence, explained below.

The five-year lock-in under 44AD

If you opt for 44AD in a year and then, in any of the next five years, declare a profit lower than the presumptive rate, you cannot come back to 44AD for the five years after that. During that period, if your income is above the basic exemption limit, you must keep books and get a tax audit. Section 44ADA has no such lock-in, so a professional can move in and out depending on the year.

Partnership firms

A partnership firm can use both 44AD and 44ADA if it meets the conditions. The firm's presumptive income is taxed in the firm's hands. Firms have their own rules on partner remuneration and interest, so get the computation done by a professional rather than using this calculator, which is built for individuals.

Salary plus side business

If you have a salary and also run a side business or freelance, you can use 44AD or 44ADA for the business part. Your salary still gets the standard deduction, and both incomes are added for tax. Because your total income is higher, the slab rate on the business income will usually be higher than the calculator shows. In such a case the right form may also change, as explained in the filing section.

Deductions and the old regime

You cannot claim business expenses on top of presumptive income. However, if you choose the old regime, Chapter VI-A deductions such as 80C (₹1.5 lakh), 80D and 80CCD(1B) are still available against your total income. A business or professional taxpayer can switch from the new regime to the old regime, but the switching rules for people with business income are stricter than for salaried people. Check the rules for your case before choosing.

GST is a separate matter

Presumptive income tax has nothing to do with GST. If your turnover requires GST registration, you must still register, collect GST and file GST returns. The turnover you show in your income tax return should match what you report under GST, after adjusting for exempt supplies and timing. You can work out tax on your invoices with the GST calculator.

Common mistakes to avoid

• Using net receipts instead of gross receipts. The percentage applies to your total turnover or gross receipts, not to what is left after paying suppliers.
• Counting UPI to a personal account as "cash". UPI is an electronic mode and qualifies for 6% under 44AD. What matters is the mode, not which account it lands in, though keeping business money in a separate account makes life much easier.
• Ignoring the 5% cash test. A small increase in cash can drop your limit from ₹3 crore to ₹2 crore, or from ₹75 lakh to ₹50 lakh.
• Freelancers picking 44AD at 6% to pay less. If your work is a specified profession, 44ADA at 50% applies. Using 44AD for professional income is not allowed.
• Not paying advance tax. Presumptive taxpayers must pay their entire advance tax by 15 March. Missing it leads to interest.
• Not matching AIS. Your clients deduct TDS and report payments to you. Your declared receipts should be at least what appears in your Annual Information Statement and Form 26AS.
• Forgetting the balance sheet items. ITR-4 asks for basic financial particulars such as sundry debtors, creditors, stock and cash balance. Keep a simple record so you can fill these honestly.
• Dropping below the rate without planning. Declaring lower profit in one year can trigger the five-year lock-in and audit under 44AD.

Advance tax for presumptive income

Most taxpayers pay advance tax in four instalments: 15 June, 15 September, 15 December and 15 March. Presumptive taxpayers under 44AD and 44ADA get a simpler rule. They can pay 100% of their advance tax in one instalment, on or before 15 March of the financial year. Paying earlier is allowed too.

Advance tax applies only if your total tax for the year, after TDS, is ₹10,000 or more. If you pay less than required by 15 March, interest is charged under Section 234B and Section 234C. You can estimate the instalments with the advance tax calculator.

Keep in mind that the 15 March date is for the deemed profit. If your receipts in the last two weeks of March are large, estimate them and include them in your payment.

Records and documents to keep

You do not need full books, but you do need enough records to support your return. Keep these for each year:

• Bank statements of every account where business receipts come in.
• Sales invoices or a sales register, and GST returns if you are registered.
• A simple record of cash receipts, such as a daily cash book or the cash summary from your billing software.
• Form 26AS and AIS, downloaded from the income tax portal, to cross-check TDS and reported receipts.
• Advance tax challans.
• Year-end figures for stock, debtors, creditors and cash in hand, which ITR-4 asks for.
• Investment and insurance proofs if you plan to use the old regime.

You can download your AIS and Form 26AS, and file the return, on the official income tax e-filing portal.

How this connects to your ITR

People using 44AD or 44ADA usually file ITR-4, also called Sugam. It is a short form. You enter your gross receipts split into digital and cash, the presumptive income, basic balance sheet figures and your other income such as salary, one house property and interest.

ITR-4 has conditions. It is for residents whose total income does not exceed ₹50 lakh, and it cannot be used in certain situations, for example when you have capital gains beyond what the form allows, more than one house property, foreign assets or certain other income. In those cases you file ITR-3 and report the presumptive income in its schedule. If you are not sure which form fits, use the which ITR form tool.

The due date for filing, for presumptive taxpayers who do not need an audit, is normally 31 July after the end of the financial year, unless extended. Filing late attracts a fee under Section 234F of up to ₹5,000 (₹1,000 if your total income is up to ₹5 lakh).

Is the presumptive scheme right for you?

The scheme is usually a good choice when your real profit margin is higher than the deemed rate, or close to it, and you want simple compliance. It saves the cost of maintaining books and of a tax audit, and it reduces the chance of disputes about expenses.

It may not suit you if your actual margin is much lower than the deemed rate. A wholesale trader working on a 2% margin, for example, pays tax on 6% or 8% under 44AD. In that case, keeping books and declaring actual profit may cost less in tax, even after accounting fees. Before deciding, especially under 44AD with its five-year lock-in, compare both options for at least the next two or three years.

Professionals often find 44ADA attractive because many have expenses well below 50% of receipts. But if you have heavy costs, such as staff salaries, rent for a clinic or expensive equipment, your real profit may be lower than 50%, and regular books may work out better.

Get it checked by an expert

Choosing between 44AD, 44ADA and regular books affects your tax for years, especially with the five-year rule. TaxCaller's expert can check your receipts, confirm which section applies to your work, work out your advance tax and file your ITR-4 or ITR-3 for you. The fee is told upfront, before any work starts, and your first call is free. See our income tax filing service to get started.