Presumptive-Tax: Get 50% of your Income Exempted under this scheme.


Presumptive Tax

If you are a professional i.e Consultant, Blogger, Freelancer or provide any other service which comes under professional income, you can use this Presumptive-Tax. Presumptive-Tax u/s 44ADA of the Income Tax Act is for the professional having income up to Rs50 Lakh per annum. Under this scheme, Professional has the option to pay tax on only half of the professional income earned.

Professionals Covered under 44ADA

This scheme was introduced to relief the small or medium-sized taxpayers. 

List of professions who can avail Presumptive-Tax are.

  • Engineering.
  • Legal.
  • Architectural profession.
  • Accountant.
  • Medical.
  • Technical consultant.
  • Interior business.
  • Other notified professionals such as authorized representatives, film artists, certain sports-related persons, company secretaries and information technology.

Terms and Conditions

Terms and Conditions for obtaining the presumptive-taxation scheme

  1. Net turnover for the given financial year should be less than 2 crores.
  2. Gross profit should be more than 8% of the turnover.
  3. Once you choose to file your ITR as per presumptive profit, then you have to file it continuously for 5 subsequent years. If you decide to show profits as per regular business before the end of these 5 years, you will lose presumptive benefits and disallowed from presumptive taxation for the subsequent 5 years.


Benefits under Presumptive-Taxation Scheme.

No need to maintain books of accounts

If you choose to presumptive taxation scheme, no need to maintain records of expenses and income proofs

 Your profit will be reduced to 50%

Once you opt for presumptive-tax profit, you cannot show the expenses incurred for that year, 44ADA scheme will consider only 50% profit as your Net Income.

 No Audit required

This scheme is available only to a resident assessee who is an individual, HUF or Partnership firm (other than LLP).

Let us understand the example below.

If George is earning Rs.30 Lakhs for the financial year through the profession and his total expenses for the given year is Rs.10 Lakhs. 

If George file his ITR normally with showing expenses then his taxable income will be

Income     – Rs. 30 Lakhs

Expenses –   Rs. 10 Lakhs (less)

Net Taxable Income – Rs. 20 Lakhs 

So George will be taxed for RS.20 Lakhs

But, if he chooses to file with presumptive tax scheme (u/s 44ADA) 

Income – Rs.30 Lakhs

Exempt – Rs 15 Lakhs (50% Income Exempted according to sec 44ADA)

So George will be taxed for Rs.15 Lakhs

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