Presumptive Taxation under 44ADA -

Hi, I am a technical consultant and was thinking of filing under section 44 ADA for my income. Basically pay tax for 50% of my total income. When I spoke with a CA, he advised me to not go for this scheme as this can create problems later, since my actual profit will be more than 50%. I looked online and many CA websites share his opinion, their recommendation is to maintain books and then file under regular scheme and not presumptive scheme.

My question would be is it illegal to use presumptive taxation if my profits are above 50%? If that’s the case then the law (44ADA) is pretty meaningless I think. Can someone who has filed under 44ADA please advise?

Hi @Sankar123,

Following are the benefits of filing under 44ADA:

  1. Taxpayer does not need to maintain books of accounts as per section 44AA,
  2. Taxpayer does not need to pay advance tax each quarter and can pay it in last installment i.e, by 15th march of the financial year,
  3. Tax audit will not be applicable if professional income is shown under 44ADA,
  4. Taxpayers can file ITR-4 which is simpler than ITR-3.

However, as per section 44ADA, a taxpayer needs to show a minimum 50% of gross receipt or a higher amount claimed to have been earned as income while opting for 44ADA.

Hope this helps :slightly_smiling_face:

1 Like