44AD presumptive business income.
Presumptive taxable income
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Total turnover
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Effective profit rate
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Your breakdown
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What Section 44AD actually does for a small business
Section 44AD is a presumptive scheme for resident individuals, Hindu Undivided Families, and partnership firms (not LLPs) running an eligible business. Instead of maintaining full books and getting a tax audit, you simply declare a fixed percentage of turnover as profit and pay tax on that. The deemed profit is 8 percent of turnover received in cash and 6 percent of turnover received through banking channels or digital modes such as UPI, NEFT, RTGS, cheque, or card. The 6 percent rate was a deliberate nudge to push small traders towards digital receipts, and it is the single biggest lever you control on this page.
The headline turnover ceiling is now ₹3 crore. That higher limit came in through the Finance Act 2023, not Budget 2025, and it carries a condition the calculator above does not police: the ₹3 crore cap applies only if cash receipts (including cash payments) are 5 percent or less of total turnover. If you cross that 5 percent cash threshold, your eligibility limit drops back to ₹2 crore. Budget 2025 left 44AD itself untouched, so the rates and limits for FY 2025-26 are the same as the prior year.
A worked example: a trader with mixed receipts
Take a kirana wholesaler with ₹50 lakh routed through UPI and bank transfers and ₹5 lakh collected in cash over FY 2025-26. The two streams are taxed at different deemed rates, so the calculator adds them separately rather than applying one blended percentage.
The deemed profit of ₹3.4 lakh is what flows into your slab, and you owe no tax on it once the basic exemption and Section 87A rebate are applied. The chart shows how the two receipt types contribute to that ₹3.4 lakh: the digital slice dominates not just because it is larger but because every rupee in it is taxed two percentage points lighter.
The five-year lock-in trap most people miss
This is the part that bites later. If you opt into 44AD and then, in any of the next five assessment years, decide to declare lower profit and exit the scheme, you are barred from using 44AD for the following five years. On top of that, the year you exit you must maintain books under Section 44AA and get a tax audit under Section 44AB if your income exceeds the basic exemption. So treat 44AD as a multi-year commitment, not a button you toggle annually based on whichever shows less tax. A second common error is forgetting that under presumptive taxation you cannot separately claim business expenses, depreciation, or partner remuneration. The deemed percentage is your final profit figure, full stop.
Which ITR form and when do I pay tax?
44AD income is reported in ITR-4 (Sugam). For AY 2026-27 the due date for non-audit filers is 31 July 2026. One quirk: presumptive taxpayers pay their entire advance tax in a single instalment by 15 March rather than across four quarterly dates, which is a genuine cash-flow convenience.
Can a professional like a doctor or lawyer use 44AD?
No. 44AD is for business and trading. Specified professionals (legal, medical, engineering, accountancy, architecture, technical consultancy, and similar) fall under Section 44ADA instead, which deems 50 percent of gross receipts as profit. If you run both a business and a profession, the two are computed under their respective sections.
Does declaring 6 or 8 percent mean I really earned that little?
Not necessarily. The deemed figure is a tax fiction. If your real margin is higher, 44AD is generous and you keep the difference untaxed. If your real margin is genuinely lower, you are allowed to declare actual lower profit, but only by maintaining books and submitting to audit, and you trigger the five-year exit rule described above. Run the numbers both ways before committing.