Section 44ADA of the Income Tax Act provides a presumptive taxation scheme for specified professionals covered under Section 44AA(1), including doctors, lawyers, chartered accountants, engineers, architects, IT professionals, and others. Only resident individuals and resident partnership firms (excluding LLPs) are eligible to opt for Section 44ADA. The scheme applies where gross receipts do not exceed Rs. 50 lakh, extendable to Rs. 75 lakh if cash receipts do not exceed 5% of total receipts. Eligible professionals must declare a minimum profit of 50% of gross receipts. If income declared is lower than 50% and total income exceeds the basic exemption limit, tax audit becomes mandatory under Section 44AB(d). If receipts exceed prescribed limits, audit is required under Section 44AB(b). Non-specified professionals cannot opt for Section 44ADA and may fall under Section 44AD if eligible. Proper understanding of thresholds and audit triggers is essential to avoid non-compliance.
1. Coverage of this article:
a. In this article, I am discussing the applicability of Section 44ADA to various types of professions which are covered u/s 44AA.
b. I will also cover the applicability of tax audit cases where the assessee is covered u/s 44ADA.
2. Section 44DA applicability:
a. It is applicable on specified profession which is covered u/s 44AA (1).
b. All types of professionals or consultants are not eligible to opt the Section 44ADA.
3. List of specified professionals:
a. Legal services (Advocates)
b. Engineer
c. Interior decoration
d. Medical profession (Doctors)
e. Profession of accountancy (Chartered Accountant)
f. Company Secretary
g. Architecture
h. Information technology
i. Technical consultancy
j. Cost Management accountant
k. Other specified profession i.e. film artists
Only above-mentioned professions are eligible to opt 44ADA.
4. Non specified professionals:
Professions other than above who is not covered here are eligible to opt the Section 44AD instead of declaring the income u/s 44ADA.
5. Eligible assessee u/s 44ADA:
| S No | Nature of Assessee | Applicability of 44ADA |
| 1 | Individual who is a resident | Yes |
| 2 | HUF who is a resident | No |
| 3 | Partnership firm who is a resident | Yes |
| 4 | LLP who is a resident | No |
| 5 | Company who is a resident | No |
| 6 | Society who is a resident | No |
| 7 | Trust who is a resident | No |
| 8 | Individual who is a non-resident | No |
| 9 | HUF who is a non-resident | No |
| 10 | Partnership firm who is a non-resident | No |
| 11 | LLP who is a non-resident | No |
| 12 | Company who is a non-resident | No |
| 13 | Society who is a non-resident | No |
| 14 | Trust who is a non-resident | No |
| 15 | Others | No |
a. Only Individual & partnership firm, who is a resident, are eligible person who can go for 44ADA.
b. The other types of categories are not eligible to take the benefit of this presumptive taxation scheme us 44ADA as well as us 44AD.
6. Threshold limit for Section 44ADA:
a. If total gross receipts of specified professions did not exceeds 50,00,000 then eligible assessee can opt this section.
b. There is no such restriction whether you have received the money in cash or not.
c. Minimum 50% profit should be declared.
7. Minimum profit to be declared:
Under this section, minimum profit should be equal to 50% of total gross receipts. If this condition is not fulfilled by the person, then audit will be mandatory us 44AB(d) if total income exceeds the basic exemption limit.
8. Bare Act of Sec 44ADA:
(4) Notwithstanding anything contained in the foregoing provisions of this section, an assessee who claims that his profits and gains from the profession are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (1) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.
9. Enhancement of limit:
a. Assessee is also eligible to opt this section when his gross receipts does not exceed 75,00,000 provided that amount received in cash during the year does not exceeds the 5% of total amount received during the year.
b. This restriction is applicable when gross receipts exceed the limit of 50,00,000 but does not exceed the limit of 75,00,000.
c. There is no condition for payment. It means you can pay the expenses in cash or via bank.
10. Optional or mandatory:
a. Section 44ADA is mandatory for above mentioned professional.
b. If you are not declaring the income as per this section then audit will be mandatory us 44AB(b) or 44AB(d).
11. 44AD & 44ADA for specified professions:
| S No | Nature of Assessee | Applicability of 44ADA | Applicability of 44AD |
| 1 | Individual who is a resident | Yes | No |
| 2 | HUF who is a resident | No | No |
| 3 | Partnership firm who is a resident | Yes | No |
| 4 | LLP who is a resident | No | No |
| 5 | Company who is a resident | No | No |
| 6 | Society who is a resident | No | No |
| 7 | Trust who is a resident | No | No |
| 8 | Individual who is a non-resident | No | No |
| 9 | HUF who is a non-resident | No | No |
| 10 | Partnership firm who is a non-resident | No | No |
| 11 | LLP who is a non-resident | No | No |
| 12 | Company who is a non-resident | No | No |
| 13 | Society who is a non-resident | No | No |
| 14 | Trust who is a non-resident | No | No |
| 15 | Others | No | No |
If a person engaged in specified profession which is covered u/s 44AA & they are not eligible assessee in such cases they also cannot opt the Section 44AD.
12. Practical scenario 1:
Suppose Mr. Ram is engaged in specified profession & eligible for 44ADA:
| S No | Particulars | % of profit declared | Amount |
| 1 | Gross receipts | 40,00,000 | |
| 2 | Profit declared | 60% | 24,00,000 |
Profit declared by Ram is not less than the 50%. Hence, there is no requirement of audit.
13. Practical scenario 2:
Suppose Mr. Ram is engaged in specified profession & eligible for 44ADA:
| S No | Particulars | % of profit declared | Amount |
| 1 | Gross receipts | 40,00,000 | |
| 2 | Profit declared | 40% | 16,00,000 |
Profit declared by Ram is less than 50% & his total income exceeds the basic exemption limit. Hence, there is requirement of audit u/s 44AB(d) instead of 44AB(b).
14. Practical scenario 3:
Suppose Mr. Ram is engaged in specified profession & eligible for 44ADA:
| S No | Particulars | % of profit declared | Amount |
| 1 | Gross receipts | 60,00,000 | |
| 2 | Gross receipts in cash | 2,00,000 | |
| 3 | Profit declared | 60% | 36,00,000 |
a. Profit declared by Ram is not less than 50%. Hence, there is no requirement of audit.
b. Gross receipts exceed the 50,00,000 & cash receipts does not exceed 5% of total receipts. Therefore, he is eligible to opt this section.
15. Practical scenario 4:
Suppose Mr. Ram is engaged in specified profession & eligible for 44ADA:
| S No | Particulars | % of profit declared | Amount |
| 1 | Gross receipts | 60,00,000 | |
| 2 | Gross receipts in cash | 2,00,000 | |
| 3 | Profit declared | 40% | 24,00,000 |
a. Gross receipts exceed the 50,00,000 & cash receipts are not exceed 5% of total receipts. Therefore, he is eligible to opt this section.
b. Profit declared by Ram is less than 50% and his total income exceeds the basic exemption limit. Hence, there is requirement of audit u/s 44AB(d) instead of 44AB(b).
16. Practical scenario 5:
Suppose Mr. Ram is engaged in specified profession & eligible for 44ADA:
| S No | Particulars | % of profit declared | Amount |
| 1 | Gross receipts | 60,00,000 | |
| 2 | Gross receipts in cash | 8,00,000 | |
| 3 | Profit declared | 60% | 24,00,000 |
a. Gross receipts exceed the 50,00,000 & cash receipts are exceed the 5% of total receipts. Therefore, he is not eligible to opt this section.
b. Hence, there is requirement of audit u/s 44AB(b) instead of 44AB(d).
17. Explanation of total income:
a. If profit is declared less than the 50% of total gross receipts by the eligible assessee & his total income** exceeds the basic exemption limit then there will be a requirement of audit us 44AB(d).
** Total income means all heads of income including salary, rental income, capital gain & others.
18. Profession covered us 44AB(b):
a. Those professions are specified us 44AA(1) are covered u/s 44AB(b).
b. Non specified professions are also covered u/s 44AB(b).
c. All types of assessee are covered under this section. It may be individual, HUF, LLP, Company and others.
19. Note:
a. In above practical scenario from 1 to 5, specified profession can opt the 44ADA. If he declares the minimum profit u/s 44ADA then will be no requirement of audit.
b. In above practical scenario from 1 to 5, specified profession can opt the 44ADA but if he declares the profit less than 50% & total income exceeds the basic exemption limit then will be a requirement of audit us 44AB(d) instead of 44AB(b).
c. In above practical scenario from 1 to 5, specified profession receipts exceed the 50,00,000 or 75,00,000 then there will be a requirement of audit us 44AB(b).
20. Bare Act of Sec 44AB:
Every person,
(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year:
Provided that in the case of a person whose—
(a) aggregate of all amounts received including amount received for sales, turnover or gross receipts during the previous year, in cash, does not exceed five per cent of the said amount; and
(b) aggregate of all payments made including amount incurred for expenditure, in cash, during the previous year does not exceed five per cent of the said payment,
this clause shall have effect as if for the words “one crore rupees”, the words “ten crore rupees” had been substituted:
Provided further that for the purposes of this clause, the payment or receipt, as the case may be, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the payment or receipt, as the case may be, in cash; or
(b) carrying on profession shall, if his gross receipts in profession exceed fifty lakh rupees in any previous year; or
(c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AE or section 44BB or section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or
(d) carrying on the profession shall, if the profits and gains from the profession are deemed to be the profits and gains of such person under section 44ADA and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his profession and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year; or
(e) carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,
get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant.
20. Technical comparison chart for specified profession for tax audit clause:
| S No | Nature of Assessee | Applicability of 44ADA | Applicability of tax audit clause |
| 1 | Individual who is a resident | Yes | 44AB(b) or 44AB(d) |
| 2 | HUF who is a resident | No | 44AB(b) |
| 3 | Partnership firm who is a resident | Yes | 44AB(b) or 44AB(d) |
| 4 | LLP who is a resident | No | 44AB(b) |
| 5 | Company who is a resident | No | 44AB(b) |
| 6 | Society who is a resident | No | 44AB(b) |
| 7 | Trust who is a resident | No | 44AB(b) |
| 8 | Individual who is a non-resident | No | 44AB(b) |
| 9 | HUF who is a non-resident | No | 44AB(b) |
| 10 | Partnership firm who is a non-resident | No | 44AB(b) |
| 11 | LLP who is a non-resident | No | 44AB(b) |
| 12 | Company who is a non-resident | No | 44AB(b) |
| 13 | Society who is a non-resident | No | 44AB(b) |
| 14 | Trust who is a non-resident | No | 44AB(b) |
| 15 | Others | No | 44AB(b) |
*******
If you have any queries, you can reach the author by email at caashishsingla878@gmail.com.
Disclaimer: The views and opinions expressed in this article are those of the author. This article is intended for general information purposes only and does not constitute professional advice. Readers are strongly advised to consult a qualified professional for guidance specific to their individual situation before making any financial, legal, or tax-related decisions. The author shall not be held liable for any loss or damage of any kind incurred as a result of the use of this information or for any actions taken based on the content of this article.
Author Bio
Section 44ADA is not a mandatory for Professionals to opt.