Section 44AD · Presumptive taxation for small businesses
Skip the books — declare 6–8% and move on.
- Turnover cap
- ₹3 crore (5% cash test)
- Presumed income
- 8% / 6% digital
- Eligible
- Resident Indiv, HUF, Firm (not LLP)
- Lock-in
- 5 years
In plain English
If you run a small business with turnover up to ₹3 crore (and most receipts come in digitally), you can simply declare 8% of turnover as your income — 6% for the digital portion — and skip the headache of detailed books and tax audit. LLPs don't get this shortcut.
| Meaning | Number |
|---|---|
| Turnover cap | ₹3 crore (5% cash test) |
| Presumed income | 8% / 6% digital |
| Lock-in | 5 years |
What this section covers
Section 44AD offers a presumptive scheme for resident individuals, HUFs and partnership firms (other than LLPs) carrying on an eligible business. Income is presumed at 8% of turnover or gross receipts; the rate is 6% to the extent receipts are realised through banking or prescribed electronic modes. The turnover ceiling is ₹2 crore, increased to ₹3 crore if cash receipts do not exceed 5% of total receipts. A taxpayer who opts in and later opts out within five years cannot re-enter the scheme for the next five assessment years and becomes liable for tax audit u/s 44AB if income exceeds the basic exemption limit.
Read the legal text
“Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business… shall be deemed to be the profits and gains of such business chargeable to tax under the head ‘Profits and gains of business or profession’.”
Old Act vs New Act
| Aspect | Act, 1961 | Act, 2025 |
|---|---|---|
| Section | 44AD | 58(2) Sl. 1 |
| Topic | Presumptive taxation for small businesses | |
| Verdict | Consolidated into Section 58 — mapping reviewed | |
| Notes | Mapped to Section 58(2), Table Sl. 1 of the Income-tax Act, 2025 (as amended by Finance Act 2026). Section 58 brings together the existing 44AD, 44AE and 44ADA schemes; it is not a new scheme. Sl. 1 rates and limits: detailed review pending. | |
Common confusion
The ₹3 crore turnover ceiling applies only if aggregate cash receipts (including capital introductions) do not exceed 5%. Otherwise the limit is ₹2 crore. LLPs are NOT eligible for Section 44AD.
Who should know this
Related sections
Based on the official Income-tax Act, 1961 and the published Income-tax Act, 2025 as available on the Income Tax Department website. Always verify against the published Act and consult a qualified professional.
What was checked
44AD → 58(2), Table Sl. 1: Mapping only (consolidation of existing presumptive schemes). Rates/thresholds for Sl. 1 not re-checked. Income-tax Act, 2025 as amended by Finance Act, 2026 (consolidated PDF)