Income Tax

Presumptive Taxation 44AD/44ADA Under New Tax Act

CA Nikhil Gupta·June 2026·7 min readSMALL BUSINESS · ACT 2025

Reviewed by CA Nikhil Gupta · Last reviewed 5 August 2026

Small businesses, freelancers, and professionals who opt for presumptive taxation under Sections 44AD, 44ADA, or 44AE have one of the simplest compliance regimes in Indian tax law — declare a fixed percentage of turnover as income, skip detailed books of account, and file a simplified ITR. Here's how this scheme carries forward under the Income-tax Act, 2025, including what's renumbered and what's untouched.

A Quick Recap of Presumptive Taxation

Under the Income-tax Act, 1961, three key presumptive taxation provisions allowed eligible taxpayers to declare income as a fixed percentage of turnover/receipts, without maintaining detailed books or undergoing audit (subject to conditions):

For related guidance and tools, visit the Income Tax and Salary Hub.

Section 44AD — for small businesses, presumptive income at 8% of turnover (6% for digital/non-cash receipts), with eligibility up to ₹2 crore turnover (₹3 crore if cash receipts don't exceed 5% of total turnover)
Section 44ADA — for professionals (doctors, lawyers, consultants, freelancers in specified professions), presumptive income at 50% of gross receipts, with eligibility up to ₹50 lakh gross receipts (₹75 lakh if cash receipts don't exceed 5%)
Section 44AE — for businesses owning goods carriages, presumptive income based on a per-vehicle formula tied to vehicle weight

What Happens Under the Income-tax Act, 2025

As part of the broader reorganisation, these presumptive taxation provisions are renumbered within the new Act's structure — consistent with the pattern seen across Chapter VIA deductions and TDS provisions, where the substance is preserved while the section number changes. The presumptive income rates (8%/6% for 44AD, 50% for 44ADA), the turnover/receipts thresholds (₹2 crore/₹3 crore for businesses; ₹50 lakh/₹75 lakh for professionals), and the per-vehicle computation for goods carriages under 44AE are reported to be carried forward without substantive change.

Use the Presumptive Tax Calculator — Section 58 / 44AD / 44ADA / 44AE to apply these points to your figures.

⚠ What this means practically: If you currently file under presumptive taxation, your eligibility, the percentage of turnover you declare as income, and the audit-exemption benefit all continue to work exactly as before. The change is limited to which section number your ITR and tax software cite — small businesses should expect their tax software (Tally, etc.) to handle this transition automatically, similar to how Chapter VIA deductions are being relabelled.

Why This Scheme's Continuity Matters

Presumptive taxation is one of the most widely used compliance simplifications for India's small business and gig-economy workforce — freelancers, consultants, small traders, and single-vehicle transport operators. Any disruption to this scheme would have had an outsized impact on exactly the taxpayers least equipped to handle compliance complexity. The renumbering-without-substantive-change approach for this scheme is consistent with the new Act's stated goal of simplification without disrupting settled taxpayer expectations.

For the connected rule or filing step, see Presumptive Taxation for Small Businesses: 44AD-Style Evidence Checklist.

What Hasn't Changed: Opting In and Out

The rules around switching in and out of presumptive taxation — including the restriction that taxpayers under Section 44AD who opt out and later want to re-opt in face a lock-out period if they have business income exceeding the basic exemption limit in the intervening years — are reported to continue under the new Act's renumbered provisions. If you've been planning your opt-in/opt-out strategy around these continuity rules, that planning remains valid.

Checklist for Presumptive Taxpayers — Tax Year 2026–27 Onward

Turnover/receipts thresholds — for tax year 2026–27, use section 58 of the Income-tax Act, 2025 and its current turnover/receipt and digital-payment conditions; for FY 2025–26 / AY 2026–27 continue using sections 44AD/44ADA/44AE.
Presumptive income rates — 8%/6% of turnover (business) and 50% of gross receipts (professionals) continue to apply
Books of account & audit exemption — continues for those within thresholds and declaring at or above the presumptive rate
Advance tax — presumptive taxpayers continue to pay advance tax in a single instalment by 15 March (rather than the four-instalment schedule for other taxpayers), per the existing simplified advance tax provision for this category
Return form — for AY 2026–27 use the 1961-Act ITR utility; for tax year 2026–27 use the return form prescribed under the 2025 Act/2026 Rules rather than assuming the prior ITR-4 format continues unchanged.

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Running a small business or freelancing?See our full guide to presumptive taxation under Sections 44AD, 44ADA & 44AE.

Read Presumptive Taxation Guide →

Presumptive taxation — section 58 is now the current-law anchor

Finin2min answer: For the tax year beginning 1 April 2026, the Income-tax Act, 2025 consolidates the small-business/profession presumptive rules in section 58. Eligibility thresholds and rates must be tested against the current section, payment-mode conditions and specified-profession definition. AY 2026–27, however, still uses legacy sections 44AD/44ADA/44AE.

Which law/year? FY 2025–26 / AY 2026–27 is still computed and administered under the Income-tax Act, 1961. For income of the tax year beginning 1 April 2026, the Income-tax Act, 2025 applies. Do not mix an old-Act section/form with a post-1-April-2026 transaction merely because the economic rule looks similar.

Decision table

Situation	2026 treatment / control	Why it matters
FY 2025–26 / AY 2026–27	Use 1961 Act sections 44AD/44ADA/44AE.	Old Act still governs this assessment year.
Tax year 2026–27	Use section 58 of the 2025 Act.	Do not cite 44AD as the operative section for new-law income.
Business presumptive route	Test eligible business, turnover and digital-receipt conditions.	Not every business qualifies.
Professional presumptive route	Only specified professions qualify.	Freelancer label is insufficient.
Opt-out consequences	Track the statutory lock-out/return/audit consequences.	A one-year choice can affect later years.

Worked practical example

A consultant earning ₹60 lakh in tax year 2026–27 should not start with “44ADA applies”. First test whether the profession is specified and the current section 58 receipt threshold/payment conditions are met.

Evidence checklist

turnover/receipt reconciliation
digital vs cash receipt evidence
nature-of-business/profession memo
books/audit test
regime/presumptive election history

Primary-source checks: Income Tax Department — section 58 · Income-tax Act, 2025

Use this with the original article: this module tightens current-law, edge-case and evidence controls; it does not replace the article's existing explanation or your fact-specific professional review.

Frequently Asked Questions

Has the presumptive income rate under Section 44ADA (50% of gross receipts for professionals) changed? ▼

No. The 50% presumptive income rate for professionals under the Section 44ADA-equivalent provision, along with the ₹50 lakh (or ₹75 lakh with limited cash receipts) eligibility threshold, is reported to be carried forward unchanged under the Income-tax Act, 2025. Only the section citation is expected to be renumbered as part of the broader reorganisation.

Do I need to re-file or re-opt for presumptive taxation because of the new Act? ▼

No. There is no indication that taxpayers currently under presumptive taxation (Sections 44AD/44ADA/44AE) need to take any fresh action because of the Income-tax Act, 2025's renumbering. Your continued eligibility and the applicable presumptive rates carry forward; for FY 2025-26 (AY 2026-27), continue filing under the existing section references exactly as before.

Does the new Act change the audit exemption for presumptive taxpayers? ▼

The audit exemption available to eligible presumptive taxpayers who declare income at or above the prescribed presumptive rate (and who don't otherwise exceed the relevant thresholds) is reported to continue under the renumbered provisions of the Income-tax Act, 2025. The conditions for losing this exemption — such as declaring income below the presumptive rate while having total income exceeding the basic exemption limit — are also expected to carry forward.

⚠ This article summarises the reported continuity of presumptive taxation provisions (Sections 44AD, 44ADA, 44AE of the Income-tax Act, 1961) under the renumbered Income-tax Act, 2025, effective 1 April 2026, based on tax-portal analyses available as of June 2026. Exact new section numbers are subject to final CBDT notifications. Confirm your eligibility and applicable rates with a qualified CA.

For the connected rule or filing step, see Presumptive Taxation for Professionals: 44ADA-Style Practical Guide.

Source and review trail

Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.

For the connected rule or filing step, see Income-tax Act 2025 for Small Business Owners Using Presumptive Taxation.

When you are ready for the next step, see Section 44AD for Small Traders: When Presumptive Tax Helps and Hurts.

Primary category: Income Tax
Official starting point: www.incometax.gov.in