Section 44ADA: 50% Presumptive Tax for Freelancers
Massive tax relief for gig workers! Section 44ADA allows freelancers, consultants, and professionals to claim 50% automatic deduction on gross receipts up to ₹75 lakh—without maintaining books or receipts!
💡 What is Section 44ADA?
Section 44ADA of Income Tax Act, 1961 is a presumptive taxation scheme for professionals and freelancers। यह scheme assume करती है कि आपकी gross receipts का 50% automatically expenses है—आपको proof नहीं दिखाना पड़ता!
Key Benefits:
- No need to maintain books of accounts
- No need to keep expense receipts
- No tax audit required (if turnover < ₹75L)
- Simple ITR-4 filing (Sugam form)
- 50% deduction automatic—no questions asked
✅ Who Can Use Section 44ADA?
Eligible Professions:
- Legal services (lawyers, consultants)
- Medical profession (doctors, physiotherapists)
- Engineering & architecture
- Accountancy & auditing
- Technical consultancy
- Interior decoration
- Authorized representatives
- Film artists & performers
- Freelancers (writers, designers, developers)
Income Conditions:
- Maximum Turnover: ₹75 lakh/year
- Minimum Declared Profit: 50% of gross receipts
- Cash Receipts: Maximum 5% via cash (95% digital preferred)
- Residential Status: Resident individual/partnership only
⚠️ Not Eligible: Salaried individuals with professional income, companies, non-residents
🧮 Calculation Examples
📱 Example 1: Freelance Developer
Total Project Income: ₹12,00,000
Deemed Expenses (50%): ₹6,00,000
Taxable Income: ₹6,00,000
Tax Calculation (New Regime):
₹0-3L: Nil
₹3-7L: 5% on ₹3L = ₹15,000
Total Tax: ₹15,000 only! 💰
🚗 Example 2: Cab Driver (Uber/Ola)
Annual Ride Earnings: ₹8,00,000
Actual Expenses (fuel, maintenance): ₹5,00,000
Deemed Expenses (50%): ₹4,00,000
⚠️ Section 44ADA Loss = ₹1,00,000
Better Strategy:
Don't opt for 44ADA—maintain actual books
Claim real ₹5L expenses → Taxable ₹3L
Tax: NIL (below ₹3L) ✅
💡 Smart Tip: When to Use Section 44ADA?
- Low Actual Expenses: अगर आपके real expenses 50% से कम हैं, तो 44ADA best है
- High Actual Expenses: अगर real expenses 50% से ज्यादा हैं, तो regular books maintain करें
- No Receipts: अगर आपने receipts नहीं रखे, तो 44ADA automatic 50% देता है
📝 How to File ITR-4 under Section 44ADA
Login to Income Tax Portal
Visit incometax.gov.in → Login with PAN → e-Filing → File ITR → ITR-4 (SUGAM)
Fill Personal Details
Name, PAN, address, bank account details (auto-filled if pre-validated)
Enter Gross Receipts
Part A - Schedule BP → Business/Profession Income:
- Gross Receipts: Enter total professional income (e.g., ₹12,00,000)
- Nature of Business: Select "Profession" (Code 99)
- Section 44ADA: Tick "Yes"
Auto-Calculation of Profit
System automatically calculates 50% profit → Taxable Income = ₹6,00,000 (no manual entry needed!)
Submit & Verify
Pay tax (if any) → Submit ITR → e-Verify using Aadhaar OTP / Net Banking / DSC
⚠️ Common Mistakes to Avoid
- Declaring Less Than 50% Profit: अगर आप 50% से कम profit declare करेंगे (e.g., 40%), तो आपको books maintain करनी पड़ेंगी + tax audit हो सकता है
- Exceeding ₹75L Turnover: ₹75L से ज्यादा income पर Section 44ADA लागू नहीं—regular books mandatory
- Opting Without Calculation: पहले calculate करें कि 44ADA beneficial है या regular books—blindly opt मत करें
- Not Filing ITR-4: Section 44ADA केवल ITR-4 में ही claim हो सकता है—ITR-3 में नहीं
Instant comparison: 44ADA vs Regular Books • Know your exact tax liability