If you’ve been filing under Section 44ADA for years — fifty percent of gross receipts, no books, one advance tax payment in March — you may have noticed something unsettling when you opened the Income Tax Act, 2025 for the first time.
Section 44ADA doesn’t exist.
Neither does 44AB. Or 44AA. The entire numbering you’ve built compliance muscle memory around was retired on April 1, 2026, when the new Act came into force.
The scheme itself is alive. The address changed. And a few details in the fine print shifted in ways that matter — especially for partnership firms, LLPs, and professionals trying to decode the 5% cash threshold.
Here’s what changed, what didn’t, and what trips people up.
Quick Summary
- The presumptive scheme for professionals now lives at Section 58(2), Table Sl. No. 3 of the IT Act 2025
- Rate, thresholds, and cash-receipt test are unchanged: 50% of gross receipts, ₹50L standard limit, ₹75L if cash ≤ 5%
- “Information technology” and “company secretary” are now named directly in the statute — no longer dependent on CBDT notifications
- LLPs are excluded from the scheme — this is now explicitly clear in the Act
- The five-year lock-in does not apply to the professional scheme — only to the business scheme
- Advance tax remains a single instalment due March 15
What is the new section number for the professional presumptive scheme?
Section 58(2), Table Sl. No. 3 of the Income Tax Act, 2025.
Section 58 is the new consolidated provision for all presumptive schemes. What were three separate sections in the 1961 Act — 44AD for small businesses, 44AE for goods carriage, 44ADA for professionals — are now a single table inside Section 58.
| Old provision | New provision | What it covers |
|---|---|---|
| Section 44ADA | Section 58(2), Sl. No. 3 | Presumptive scheme for specified professions |
| Section 44AA | Section 62 | Books of account |
| Section 44AB | Section 63 | Tax audit |
Everything else around the scheme — books, audit, advance tax — changed section numbers too. When referencing the audit requirement, it’s now Section 63. The audit report is now filed in Form 26 under the IT Forms 2026, replacing the old Form 3CA/3CB/3CD.
Who qualifies for the scheme under the new Act?
Section 58(2) uses the term “specified assessee” for the professional scheme. The definition is clean and specific:
- A resident individual, or
- A firm, other than a Limited Liability Partnership
That’s the complete list.
An LLP cannot opt for this scheme — and this is now unambiguous in the statute. Under the 1961 Act, the exclusion existed but practitioners sometimes debated its application. The 2025 Act leaves no room for that.
A company and an HUF also cannot opt for the scheme. Only resident individuals and non-LLP firms qualify.
Which professions does Section 62(4) cover?
Section 62(4) of the IT Act 2025 defines “specified profession” as:
legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology or company secretary
The list is nearly identical to the old Section 44AA(1). Two things changed.
Information technology and company secretary are now in the statute directly. Under the 1961 Act, IT consultants and company secretaries were covered through separate CBDT notifications — not in the section itself. The 2025 Act resolves this. Both are named in Section 62(4), and no notification dependency exists.
| Profession | Covered under Section 62(4)? |
|---|---|
| Chartered Accountant | Yes — “accountancy” |
| Lawyer / Advocate | Yes — “legal” |
| Doctor / Surgeon | Yes — “medical” |
| Engineer | Yes — “engineering” |
| Architect | Yes — “architectural” |
| IT Consultant / Developer | Yes — now explicit in statute |
| Company Secretary | Yes — now explicit in statute |
| Interior Designer | Yes — “interior decoration” |
| Technical Consultant | Yes |
| Management Consultant | Not listed — may fall under the business scheme at Sl. No. 1 |
| Freelance Trainer / Teacher | Not listed — depends on nature of income |
How is the income computed? Is it still 50%?
Yes. Section 58(2), Sl. No. 3 reads:
50% of the gross receipts, or profit claimed to have been actually earned, whichever is higher.
Two mechanics here that regularly trip people up.
50% is a floor, not a target. If your actual margins are 70%, you declare 70%. The law says “whichever is higher.” Declaring 50% when actual profit is above that is incorrect.
The no-deduction bar is absolute. Section 58(4) states that no loss, allowance, or deduction under the Act shall be allowed against income computed under the presumptive scheme. No depreciation, no office rent, no professional expenses come off the 50%.
But here’s the nuance that matters for individual taxpayers: Chapter VIII deductions — Section 123 (LIC/PF), Section 126 (health insurance), Section 133 (donations) — are not affected. They reduce your total income after the head-level computation. You can still claim ₹1.5L under Section 123 and ₹25,000 under Section 126. Those deductions are applied after presumptive income is computed, not against it.
What are the gross receipt thresholds?
| Gross receipts | Cash receipts condition | Scheme available? |
|---|---|---|
| ≤ ₹50 lakh | Any | Yes |
| > ₹50L and ≤ ₹75L | Cash ≤ 5% of gross receipts | Yes |
| > ₹50L and ≤ ₹75L | Cash > 5% | No |
| > ₹75 lakh | Any | No |
What counts as “cash” for the 5% test?
Section 58(9) of the IT Act 2025 answers this directly: a cheque drawn on a bank or a bank draft that is not account-payee is treated as cash.
Account-payee cheques, NEFT, RTGS, and UPI are non-cash. A bearer cheque or order cheque is cash — even if it passed through a bank. The distinction is the payee designation, not the instrument.
What if actual profit is below 50%?
You can declare lower, but Section 58(3) sets conditions.
If your total income exceeds the basic exemption limit and your actual profit is below 50%, you must:
- Maintain books of account as required under Section 62
- Get a tax audit under Section 63
- Furnish the audit report in Form 26 by October 31
If your total income is below the basic exemption limit, no audit is required even when actual profit falls below 50%. You can declare the lower figure without any compliance obligation beyond filing your return.
Is there a five-year lock-in for professionals?
No.
The five-year lock-in under Section 58(7) applies only to the business scheme at Sl. No. 1 — the equivalent of old Section 44AD. The professional scheme at Sl. No. 3 has no such restriction.
A CA, doctor, or architect can opt for the presumptive scheme in TY 2026-27, opt out in TY 2027-28 without any penalty, and opt back in the year after. The only compliance consequence of opting out in a year where actual profit is below 50% is the audit requirement — not a multi-year disqualification.
This distinction matters practically. Many professionals believe the lock-in applies to them because advisors sometimes describe presumptive taxation as a single scheme. It isn’t. The business and professional schemes are separate entries in the Section 58 table, with separate conditions.
Can a partnership firm of CAs or doctors use the scheme?
Yes, with one important limitation.
A partnership firm (not an LLP) carrying on a specified profession qualifies as a “specified assessee” and can opt for Section 58(2), Sl. No. 3.
But Section 58(5) allows the deduction of salary and interest paid to partners only for the goods carriage scheme at Sl. No. 2. For the professional scheme at Sl. No. 3, no such deduction is available.
This means a firm of CAs that computes presumptive income at 50% of gross receipts cannot deduct partner salaries or interest from that figure before arriving at taxable income. The 50% is computed on gross receipts directly. Partner remuneration comes out of what remains — not before the computation.
How does advance tax work for professionals on this scheme?
Section 408(2) is explicit:
An assessee who declares profits and gains as per Section 58(2) (Table Sl. No. 1 or 3) shall pay the whole amount of advance tax on or before the 15th March.
One instalment. The full amount. No June 15, no September 15, no December 15. Everything by March 15 of the financial year.
If advance tax is not paid, or paid short of the actual liability, interest under Section 425 applies — the equivalent of old Section 234C.
The threshold for advance tax liability remains ₹10,000 (Section 404). If your expected tax liability for the year is below ₹10,000, no advance tax is required.
Worked example
Priya is a resident architect. In TY 2026-27, her gross receipts are ₹62 lakh — all received by NEFT. Her actual expenses are ₹20 lakh, leaving actual profit of ₹42 lakh.
Eligibility: Architecture is a specified profession under Section 62(4). Gross receipts ≤ ₹75L. Cash receipts = 0%. Scheme available.
Income computation:
- 50% of ₹62L = ₹31L (presumptive floor)
- Actual profit = ₹42L (higher than 50%)
- Declare ₹42L
Deductions (Chapter VIII):
- Section 123 (LIC/PF): ₹1.5L | Section 126 (health insurance): ₹25,000
- Taxable income: ₹42L − ₹1.75L = ₹40.25L
Advance tax: Full amount due by March 15, 2027. No books required. No audit required. File ITR-4 (SUGAM).
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