If you’re a freelancer or work as a doctor, lawyer, chartered accountant, architect, engineer or another eligible professional, there’s a tax provision that could help reduce your tax burden.
Under Section 44ADA of the Income Tax Act, eligible professionals can declare only 50% of their professional income as taxable.
The remaining 50% is treated as business expenses, so there is no need to maintain detailed expense bills or records for that amount.
Who Can Claim the Benefit of Section 44ADA?
This scheme is available to resident professionals engaged in notified professions.
Eligible professionals include:
Doctors
Lawyers
Chartered Accountants (CAs)
Engineers
Architects
Interior Decorators
Technical Consultants
Other notified professionals
Some freelancers may also be eligible if they fall under the prescribed rules and profession categories.
How Does Section 44ADA Work?
The scheme follows the presumptive taxation method, making tax filing much simpler.
For example, if an eligible professional earns ₹40 lakh in professional receipts during a financial year, they can declare only ₹20 lakh as taxable income under Section 44ADA.
The remaining ₹20 lakh is automatically treated as expenses.
This means there is no requirement to submit separate bills or maintain detailed records to claim those expenses.
Income Limit You Should Know
To use Section 44ADA, certain conditions must be met.
The taxpayer must be a resident professional.
Gross professional receipts must be within the prescribed limit.
If 95% or more of the receipts are received through digital modes, the turnover limit can go up to ₹75 lakh.
If this condition is not met, the normal eligibility limit remains ₹50 lakh.
Advance Tax Rules
Professionals choosing the Section 44ADA scheme must also pay advance tax.
As per the rules, the entire advance tax amount must be paid by March 15 of the financial year. Failure to do so may result in interest being charged under the Income Tax Act.
Which ITR Form Should You File?
Professionals opting for the presumptive taxation scheme under Section 44ADA can generally file their income tax return using ITR-4 (Sugam), provided they meet all the eligibility conditions for this form.
For eligible professionals, Section 44ADA not only reduces paperwork but also simplifies tax filing while offering a straightforward way to calculate taxable income.
Before opting for the scheme, it is advisable to ensure that you meet all the prescribed conditions under the Income Tax Act.