Tax · Tax for small business + freelancers
Presumptive Taxation (44AD/44ADA/44AE)
Presumptive taxation is the simplest filing route for small businesses + freelancers. Section 44AD: declare 8% (cash) / 6% (digital) of turnover as income, no books needed. Section 44ADA: 50% of receipts as income for professionals. Section 44AE: ₹1K/ton/month for goods carriages. Big advantage: no tax audit + minimal compliance + ITR-4 (Sugam) form.
Who needs this
Small traders / shopkeepers (44AD, turnover ≤ ₹3Cr / ₹2Cr depending on digital%), freelancers/professionals (44ADA, receipts ≤ ₹75L / ₹50L), and goods transporters (44AE, ≤ 10 vehicles).
Key dates
- Advance tax (44AD/44ADA)Single instalment by Mar 15, 2027
- ITR-4 (Sugam) filingJul 31, 2026
- Books retention (presumptive)Not mandatory — but keep bank statements
Key decisions
- Q1
44AD or actual books?
Choose 44AD if your real margins are under 6-8% AND you want zero audit hassle. Choose actual books if margins are higher (you'd over-pay tax under presumptive) or if you have heavy capex/depreciation to claim.
- Q2
44ADA — 50% income deemed?
Yes — for CAs, doctors, lawyers, architects, technical consultants, interior designers, etc. Receipts ≤ ₹75L (≤ 5% cash) / ₹50L (otherwise). Pay all advance tax in ONE go by Mar 15.
- Q3
Can I switch out of presumptive?
44AD: if you opt out, you're LOCKED OUT for next 5 years (penalty design to prevent rotation). 44ADA: switch is allowed but tax audit applies if profits declared < 50% AND income > exemption limit.
- Q4
Is GST relevant here?
Separate. Presumptive taxation is ONLY income tax. GST registration depends on turnover thresholds (₹40L goods / ₹20L services). Freelancers under 44ADA + above ₹20L: register for GST.
CBDT rules + tax-act references
- 44AD: turnover ≤ ₹3Cr (≥ 95% digital) / ₹2Cr otherwise. Declare 6% (digital) / 8% (cash) as income.
- 44ADA: receipts ≤ ₹75L (≤ 5% cash) / ₹50L otherwise. Declare 50% as income.
- 44AE: goods carriages ≤ 10 vehicles. ₹1K/ton/month (heavy) / ₹7.5K/month (light).
- Opt-out lock: 44AD bars re-entry for 5 FYs after opt-out.
- ITR-4 (Sugam) form. No books / audit needed if presumptive declared correctly.
Calculators
All tax topics
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