The higher ₹3 crore 44AD ceiling applies only when cash receipts do not exceed 5% of turnover/gross receipts.
The higher ₹3 crore 44AD ceiling applies only when cash receipts do not exceed 5% of turnover/gross receipts. Non-account-payee cheques or drafts are treated as cash for this test.
The 5% test for 44AD looks at receipts. The ₹10 crore tax-audit relaxation separately tests both cash receipts and cash payments.
Aggregate turnover; classify cash/deemed-cash receipts; divide by turnover; retain bank and payment-mode evidence.
Turnover ₹2.60 crore and cash receipts ₹12 lakh gives 4.62%, so the higher ceiling can apply. Cash receipts ₹15 lakh gives 5.77%, so the ordinary ₹2 crore ceiling applies.
The example is an illustration, not a substitute for the taxpayer's facts. A change in status, period, payment mode, document, city, asset, relationship or scheme can change the result.
Search pages often state a rate or limit without identifying the governing base. The calculation must distinguish gross receipt from taxable profit, tax from TDS, a deduction from an exemption, salary from business income, and an accounting entry from the tax treatment.
| Decision point | Required treatment |
|---|---|
| Legal year | Use the Act, rules and notification effective for the income or transaction period |
| Taxpayer category | Confirm residence, age, entity, employee/business status and regime |
| Calculation base | Use the statutory definition rather than CTC, net bank receipt or accounting label |
| Ceiling or rate | Apply actual-amount, percentage, shared, lifetime and gross-income limits in sequence |
| Documentation | Link every input to an invoice, statement, contract, certificate or official record |
| Final output | Show tax, surcharge, cess, interest and TDS/TCS credits separately |
This page is written around the entities and concepts search engines expect for the topic: section 58, 44AD, presumptive income, 6%, 8%, cash receipts. They are used only where relevant and are connected to the live calculator and knowledge hub rather than repeated mechanically.
For the complete rules on this topic, see the core guide: Presumptive Taxation (44AD/44ADA) Under Income-tax Act 2025.
See the broader Income-tax Act 2025 study guide hub for related rules and calculators on this topic.
The higher ₹3 crore 44AD ceiling applies only when cash receipts do not exceed 5% of turnover/gross receipts. Non-account-payee cheques or drafts are treated as cash for this test.
Finin2min rule: establish eligibility, calculate transparently, and preserve an audit trail.
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