Claim audit · FY 2026-27

“Under Section 44ADA, a professional can declare only 50% of gross receipts as income, and the remaining 50% is completely tax-free. This applies to all self-employed individuals, including freelancers of every kind, with no ceiling.”

Section 44ADA provides a presumptive taxation scheme for resident individuals, Hindu undivided families, and partnership firms in specified professions. The scheme allows the taxpayer to offer 50% of gross receipts as income, and the remaining 50% is treated as deemed expenses. This removes the need to maintain detailed books of account. However, the scheme is available only to professionals in the specified list: legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, and certain other notified professions. A person in the film industry and a company secretary or an authorised representative under the Income-tax Act are also covered. General freelancers such as software developers, writers, influencers, or e-commerce sellers are not automatically covered unless their activities fall within the notified professions. The gross receipts must not exceed Rs 75 lakh in a financial year, increased from the earlier Rs 50 lakh by the Finance Act, 2023. The receipts must arise from the professional activity, not from capital gains or other sources. If the actual profit is higher than 50%, the declared amount is treated as misreported income in scrutiny, potentially attracting penalty under Section 270A. If the actual profit is lower than 50%, the taxpayer may be better off opting for normal computation with books of account, but once 44ADA is chosen, the 50% rule is binding. The scheme is not available in the new tax regime, because presumptive income under 44ADA cannot be claimed alongside Section 115BAC. Additionally, GST registration is mandatory if the aggregate turnover exceeds Rs 20 lakh (or Rs 10 lakh in specified states), and TDS will apply to payments received from clients. The viral claim that 50% is tax-free is a misreading: the 50% is deemed as expenses, not as an exempt income. The effective tax rate is computed on the 50% deemed income, and in the old regime the taxpayer can further claim 80C, 80D, and other deductions on that declared income, reducing the effective rate significantly. Thus the claim is partly true: the 50% presumption is real, but the coverage is limited to eligible professions, the ceiling is Rs 75 lakh, and the choice of regime affects the final tax.