India's presumptive taxation scheme allows eligible small businesses and professionals to pay income tax on a deemed percentage of their turnover — without maintaining detailed books of accounts or getting a tax audit. It's one of the most taxpayer-friendly provisions in the Income Tax Act, yet many eligible filers still miss it.
Under the presumptive taxation scheme, your income is presumed to be a fixed percentage of your turnover or gross receipts — regardless of your actual profits. You don't need to maintain detailed books of accounts, and you're generally exempt from tax audit under Section 44AB. You file ITR-4 (Sugam) instead of ITR-3.
Who can use it: Indian resident individuals, HUFs, and partnership firms (excluding LLPs) engaged in any business except the excluded categories below.
Turnover limit: Aggregate turnover ≤ ₹3 crore in FY 2024-25 (increased from ₹2 crore; the enhanced limit of ₹3 crore applies if cash receipts are ≤ 5% of total turnover).
Deemed income: 8% of turnover (if payments received in cash) OR 6% of turnover (if received via digital/banking channels — cheque, NEFT, UPI, card).
| Turnover (Digital Receipts) | Deemed Income @ 6% | Tax (at 30% slab) | Effective Tax Rate on Turnover |
|---|---|---|---|
| ₹50 lakh | ₹3 lakh | ₹90,000 | 1.8% |
| ₹1 crore | ₹6 lakh | ₹1.8 lakh | 1.8% |
| ₹2 crore | ₹12 lakh | ₹3.6 lakh | 1.8% |
| ₹3 crore | ₹18 lakh | ₹5.4 lakh | 1.8% |
Excluded businesses (cannot use 44AD): Agency business, commission/brokerage income, professional income (covered by 44ADA), goods transport (covered by 44AE), businesses deriving income from speculative transactions.
Who can use it: Resident individuals and partnership firms (not LLPs) engaged in specified professions.
Specified professions include: Legal (lawyers), medical (doctors), engineering, architecture, accountancy (CA), technical consultancy, interior decoration, and any other profession notified by CBDT (includes film artists, company secretaries, information technology).
Gross receipts limit: ≤ ₹75 lakh in FY 2024-25 (enhanced to ₹75 lakh from ₹50 lakh if cash receipts ≤ 5% of gross receipts).
Deemed income: 50% of gross receipts. This is the presumed profit — higher than 44AD because professionals typically have higher margins.
| Gross Receipts | Deemed Income @ 50% | Less: Deductions (80C, etc.) | Approximate Tax |
|---|---|---|---|
| ₹20 lakh | ₹10 lakh | ₹1.5 lakh (80C) | ₹1.27 lakh (old regime) |
| ₹50 lakh | ₹25 lakh | ₹1.5 lakh (80C) | ₹6.5 lakh approx. |
| ₹75 lakh | ₹37.5 lakh | ₹1.5 lakh | ₹10.8 lakh approx. |
44ADA is particularly beneficial for doctors, lawyers, and CA/CS professionals with actual profit margins below 50% — which is uncommon. For most solo professionals, the deemed 50% is often close to or below their actual margins anyway, making the compliance simplification the primary benefit. See our freelance & gig income tax guide for related coverage.
Who can use it: Individuals, HUFs, firms, and companies owning ≤ 10 goods carriages at any time during the year.
Deemed income: ₹1,000 per ton per month for heavy goods vehicles (GVW > 12 tonnes) OR ₹7,500 per vehicle per month for other vehicles.
Avoid presumptive taxation if your actual profit margin is significantly below the deemed rate. For example, a trader with ₹2 crore turnover but actual profit of only ₹3 lakh (1.5% margin) would pay more tax under 44AD (6% deemed = ₹12 lakh income, tax ₹0 after basic exemption + deductions) than under regular books. Actually false here — ₹3 lakh is below basic exemption, so tax = 0 under regular scheme too — but for higher-turnover low-margin businesses, regular books are preferable.