Income-tax returns: Presumptive taxation scheme for businesses and freelancers explained — Top FAQs answered

Income-tax returns: The tax department has released and notified all ITR forms for the financial year 2025-26, i.e. assessment year 2026-27, and enabled Excel utility for the online ITR-1 (Sahaj), ITR-2 and ITR-4 (Sugam) forms for AY27 / FY26 on its e-filing portal.

Taxpayers can file their returns in the current tax year, at the latest, by 31 July 2026. If you miss the July deadline, you can still file delayed returns by 31 December, subject to applicable penalties.

Today, we take a look at the presumptive taxation scheme, which simplifies I-T compliance for small businesses, professionals, and freelancers by allowing them to declare income as a fixed percentage of turnover without maintaining detailed books of accounts.

ITR-4: What is the presumptive taxation scheme?

The presumptive taxation scheme allows freelancers, professionals and small businesses to declare income as a fixed percentage of their turnover without detailed books of accounts, according to a Clear Tax report. This is applicable under Sections 44AD, 44ADA and 44AE of the Income-Tax Act.

• The presumptive taxation scheme reduces audit requirements, eases record-keeping, and ensures smoother return filing while offering significant tax-saving opportunities for eligible taxpayers, the report added.
• Claim under the ‘Profits and Gains from Business or Profession’ head in your ITR filing using the ITR-4 Sugam online form.
• Once you choose to use presumptive taxation, it must continue for 5 consecutive years; if you exit early, re-entry is not allowed for the next 5 years.
• Those who opt for presumptive taxation are required to pay their advance tax in full in a single instalment on or before 15 March.

• Section 44AD provides for the computation of income on an estimated basis for resident individuals, resident HUFs, and resident Partnership Firms (other than LLPs), subject to certain conditions.
• Section 44ADA provides for the computation of professional income on an estimated basis for Indian residents engaged in a profession referred to in section 44AA(1), subject to certain conditions.
• Section 44AE deals with the computation of income on an estimated basis for an individual, HUF, firm (other than LLP) or any other person being a resident or non-resident engaged in the business of plying, leasing or hiring goods carriages, who owns not more than ten goods carriages at any time during the previous year.

Presumptive taxation scheme: Top FAQs answered

What is the threshold limit to opt for the presumptive taxation scheme under Section 44AD & Section 44 ADA? The threshold limit of turnover under Section 44AD is ₹3 crore (if the sum of amounts or aggregate of the amounts received during the previous year, in cash and in any other mode, does not exceed 5% of the total gross receipts of such previous year) and ₹2 crore otherwise.

The threshold limit under Section 44ADA limit is ₹75 lakh (if the sum of the amounts received during the previous year, in cash and in any other mode, does not exceed 5% of the total gross receipts of such previous year) and ₹50 lakh otherwise.

Who is not eligible for the presumptive taxation scheme of Section 44AD? The scheme of Section 44AD is designed to give relief to small taxpayers engaged in any business, except the following businesses:

• Business of plying, hiring, or leasing goods carriages referred to in sections 44AE
• A person carrying on any agency business
• A person earning income in the form of commission or brokerage (e.g., insurance agents)
• Any business whose total turnover or gross receipts exceeds ₹2 crore
• Any business whose total turnover or gross receipts exceeds ₹3 crore ( ₹3 crore applicable for cases where the amount or aggregate of the amounts received during the previous year, in cash and any other mode, does not exceed 5% of the total gross receipts of such previous year).

• Apart from the above, a person required to maintain books of account as referred to in Section 44AA (1) ​is not eligible for the presumptive taxation scheme u/s 44AD.

The gross receipts of my business in the year exceeded ₹3 crore. Can I opt for the presumptive taxation scheme of 44AD? ​No. You can opt for the presumptive taxation scheme of section 44AD only if the total turnover or gross receipts from your business do not exceed the limit prescribed (i.e. ₹3 crore).

Who can opt for the presumptive taxation scheme of Section 44ADA? The presumptive taxation scheme under Section 44ADA can be adopted by an assessee, whether an individual or a partnership firm (other than an LLP) and a resident in India, carrying on a specified profession whose gross receipts do not exceed ₹50 lakh in a financial year.

Provided that in case the amount or aggregate of the amounts received during the previous year, in cash, does not exceed five per cent of the total gross receipts of such previous year, then the limit is up to 75 lakh in a financial year.

The following professions are specified professions: legal, medical, engineering or architectural, accountancy, technical consultancy, interior decoration, and any other profession notified by the Central Board of Direct Taxes (CBDT).

I opted for the presumptive income scheme of Section 44AD or 44ADA. Can I claim further deduction of expenses after declaring profit at the applicable rate under the respective sections of gross receipts? No, a person who opted for the presumptive taxation scheme is deemed to have claimed all deductions of expenses. Any further claim of deduction is not allowed after declaring profit at the specified rate. However, you can claim deductions under Chapter VI-A​.

I opted for the presumptive income scheme of Section 44ADA. Do I have to pay Advance Tax on income from a profession covered under Section 44ADA? Yes. Anyone opting for the presumptive taxation scheme u/s 44ADA is liable to pay 100% of the advance tax on or before 15 March of the previous year. If you fail to pay the Advance Tax by 15 March of the previous year, you will be liable to pay interest as per Section 234B and Section 234C​. Any amount paid by way of Advance Tax on or before 31 March will also be treated as Advance Tax paid during the FY ending on that day.

I opted for the presumptive taxation scheme of Section 44ADA. Do I need to maintain books of accounts as per Section 44AA? If you are engaged in a specified profession as referred in Sections 44AA (1​) and opt for the presumptive taxation scheme of Section 44ADA (declare income at 50% of the gross receipts), you are not required to maintain the books of accounts in respect of the specified profession (i.e., the provision of Sections 44AA will not apply).

I opted for the presumptive taxation scheme of Section 44AE. Do I have to pay Advance Tax on income from a business covered under Section 44AE? Yes, you will be liable to pay Advance Tax. ​ There is no concession regarding the payment of advance tax if you opted for the presumptive taxation scheme of ​section 44AE.

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