Presumptive Taxation for Freelancers — Section 44ADA Guide for AY 2026-27
If you are a freelancer or consultant earning up to ₹75 lakh, Section 44ADA lets you declare 50% of receipts as profit — no books, no audit. Here is exactly who qualifies and how it works.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
If you are a freelance consultant, doctor, lawyer, architect, or engineer earning up to ₹75 lakh a year, Section 44ADA of the Income Tax Act, 1961 lets you declare 50% of your gross receipts as profit without maintaining books of accounts or getting them audited. This is the presumptive taxation scheme for professionals — and it significantly reduces compliance burden.
Who Qualifies for Section 44ADA
Section 44ADA applies to resident individuals and partnership firms (not companies or LLPs) carrying on a profession specified under Section 44AA(1):
- Legal practice (advocates, solicitors)
- Medical practice (doctors, surgeons, clinical consultants)
- Engineering and architecture
- Accountancy (Chartered Accountants, CMAs, Company Secretaries)
- Technical consultancy
- Interior decoration
- Any other profession notified by the CBDT
CBDT has notified the following additional professions: authorised representatives, film artists, and company secretaries (in practice).
Gross receipts must not exceed ₹75,00,000 in the financial year. This limit was enhanced from ₹50 lakh to ₹75 lakh by the Finance Act 2023 — but only if at least 95% of total receipts are received through non-cash modes (bank transfer, UPI, cheque, NEFT). If cash receipts exceed 5% of total receipts, the old ₹50 lakh limit applies.
New Income Tax Act, 2025: The new Act, which governs Tax Year 2026-27 (FY 2026-27) onwards, retains presumptive taxation for specified professionals under equivalent provisions. For AY 2026-27 — the return you file now for FY 2025-26 — Section 44ADA under the Income Tax Act, 1961 applies.
How Presumptive Taxation Works
You declare 50% of gross receipts as your net income from profession. The remaining 50% is deemed to cover all expenses — rent, salaries, internet, equipment, professional indemnity insurance — without any actual expense tracking.
If your actual net profit exceeds 50% of receipts, you can voluntarily declare the higher amount.
If your actual profit is less than 50% and you wish to claim it, you must opt out of Section 44ADA. This requires maintaining books of accounts under Section 44AA and — if receipts exceed ₹50 lakh for professions — getting a tax audit under Section 44AB. The audit report (Form 3CB + 3CD) must be filed by 30 September 2026 for AY 2026-27.
You cannot claim additional deductions for actual expenses (laptop, coworking, subscriptions, salaries to staff) over and above the 50% presumptive profit. However, Chapter VI-A deductions (80C, 80D, 80CCD(1B), etc.) are available on top.
Advance Tax for Presumptive Professionals
Under Section 44ADA read with the proviso to Section 211(1), presumptive taxpayers need to pay advance tax in one instalment only — by 15 March of the financial year (15 March 2026 for FY 2025-26). The quarterly advance tax schedule (June, September, December, March) that applies to regular taxpayers does not apply.
If you miss the 15 March deadline and there is a tax liability, Section 234B interest applies from April at 1% per month on the shortfall.
Which ITR Form to Use
Presumptive income under Section 44ADA is reported in ITR-4 (Sugam). ITR-4 is available to individuals, HUFs, and firms with presumptive income (44AD, 44ADA, or 44AE). You cannot use ITR-4 if you:
- Are a director in a company
- Hold unlisted equity shares
- Have foreign income or assets
- Have capital gains
In these cases, use ITR-3 and report income under the head "Profits and Gains from Business or Profession" — but you can still apply the 44ADA presumption within ITR-3.
Worked Example
Kavitha is a freelance UX designer (technical consultancy). FY 2025-26 gross receipts: ₹36,00,000, all received by bank transfer.
Tax under new regime at ₹16,00,000: ₹1,70,000 + 4% cess = ₹1,76,800. Advance tax payable as one instalment by 15 March 2026.
Frequently Asked Questions
Can I claim my actual expenses if they are more than 50% of receipts? No. Under 44ADA, 50% is the deemed profit and no further expense deduction is permitted. If your actual profit is less than 50%, you must opt out of the scheme — which triggers the books and audit requirement.
I am a freelance software developer. Do I qualify for 44ADA? The CBDT has held that software development is not a "profession" under Section 44AA(1). You likely need to use Section 44AD (for business income: 6% of digital receipts or 8% of cash receipts as deemed profit) rather than 44ADA. Check with a CA if your work involves both development and consulting.
Can I switch between 44ADA and regular taxation every year? For professions under 44ADA, yes — you can opt in or out year by year. Note: the restriction on re-entry (5-year lock-out after opting out) applies only to Section 44AD (business presumptive), not 44ADA.
What if my receipts cross ₹75 lakh mid-year? If your total receipts for the financial year exceed the threshold, Section 44ADA does not apply for that entire year. You must maintain books under §44AA and face a §44AB audit if applicable.
Is GST included in the ₹75 lakh threshold? Gross receipts for §44ADA purposes are generally understood to exclude GST collected and deposited with the government, since that is not your income. Confirm with your CA based on your specific invoicing pattern.
---
Unsure whether 44ADA or regular taxation saves more tax in your situation? Get expert [ITR filing from Harun Raaj & Associates →](/services/itr-filing)
---
See Also
Frequently Asked Questions
Can freelance doctors and lawyers use Section 44ADA for presumptive taxation in AY 2026-27?+
Yes. Section 44ADA applies to resident individuals and partnership firms (not companies or LLPs) carrying on specified professions including legal practice, medical practice, engineering, architecture, accountancy, technical consultancy, and interior decoration. The scheme is available for AY 2026-27 under Section 44ADA of the Income Tax Act, 1961.
What is the gross receipts limit for claiming 50% presumptive profit under Section 44ADA?+
The gross receipts limit is ₹75 lakh per financial year, as enhanced by the Finance Act 2023. However, this higher limit applies only if at least 95% of total receipts are received through non-cash modes (bank transfer, UPI, cheque, NEFT). If cash receipts exceed 5% of total receipts, the old limit of ₹50 lakh applies.
Do I need to maintain books of accounts and get tax audit if I opt for Section 44ADA?+
No. Section 44ADA allows you to declare 50% of gross receipts as net income without maintaining books of accounts or getting them audited. You are relieved from the audit requirement under Section 44AB. Books of accounts are only required if you opt out of Section 44ADA.
Can I claim actual expenses separately if my net profit is more than 50% under Section 44ADA?+
If your actual net profit exceeds 50% of receipts, you can voluntarily declare the higher amount and claim additional deductions for actual expenses. However, you cannot claim deductions if declaring the standard 50% profit. The remaining 50% is deemed to cover all expenses without actual expense tracking.
What happens if my actual profit is less than 50% and I want to claim lower profit in Section 44ADA?+
If your actual profit is less than 50% and you wish to claim it, you must opt out of Section 44ADA. This requires maintaining books of accounts under Section 44AA and getting a tax audit under Section 44AB if receipts exceed ₹50 lakh. The audit report (Form 3CB + 3CD) must be filed by 30 September 2026 for AY 2026-27.
Are film artists and authorised representatives eligible for presumptive taxation under Section 44ADA?+
Yes. The CBDT has notified film artists and authorised representatives as additional professions eligible for Section 44ADA presumptive taxation scheme. Company secretaries in practice are also notified as eligible professions under this section.
Related Services
Based on this article's category and vertical tag, these services are the most relevant next steps.
Need help with this?
Our team handles the paperwork. You focus on your business.