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Section 44ADA/ Section 58

Section 44ADA/ Section 58

44ADA / Section 58 Checklist

Presumptive Taxation for Professionals — Detailed Client Reference

CA Dhiraj Ostwal | Chartered Accountant | The Business Strategist

  • Who Is This Checklist For?
                   You are in a specified profession — legal, medical, engineering, architecture, accountancy, technical consultancy, or interior decoration (also covers notified professions such as film artists and authorised representatives).
  • You are a resident individual professional.
  • You are a freelancer whose work fits “technical consultancy” — software developers, designers, content creators, marketing consultants, etc.

 Note: some freelancer cases may instead be treated as business income, where different rules apply —this checklist covers professionals specifically.

2. What Is Section 44ADA / Section 58?

  • Section 44ADA (under the old Income Tax Act, 1961) is now Section 58 under the Income Tax Act, 2025— same benefit, new section number.
  • Under this provision, 50% of your gross receipts is presumed to be your taxable income. The remaining 50% is treated as deemed expenses — no bills, no books, no audit required.
  • You are eligible if your gross receipts are up to 50 lakh.
  • The limit increases to 75 lakh if more than 95% of your receipts are digital (bank, UPI, card). Cash-heavy practices should consider going digital specifically to access this higher limit.

3. Worked Examples From the Guide (Match Your Income)

Gross Receipts

Deemed Income (50%)

 

Tax Outcome

          18 lakh                                 

          9 lakh                    

ZERO tax (within new-regime rebate zone). Only ITR-4 needs to be filed

          35 lakh

       17.5 lakh

Approx. n1.56 lakh tax (effective rate under 4.5%).

          60 lakh (fully digital)

      30 lakh Approx.

5 lakh tax (effective rate around 8–8.3%).

 

 

4. Compliance & Planning Points by Income Bracket


Below 20 lakh

  • Opt  for presumptive taxation under Section 58.
  • Keep the entity simple — stay an Individual; additional entities add cost without benefit at this stage.
  • File ITR-4 and pay full advance tax in a single instalment by 15 March.


20 lakh – 50 lakh

  • Continue Section 58 presumptive taxation — 50% deemed income, no books, no audit. Effective tax works out to roughly 4–6% of gross receipts.
  • Consider Individual (for professional fees) + HUF (for rental/investment income) as a second entity for a second basic exemption and rebate.


50 lakh – 75 lakh

             Section 58 remains available ONLY if cash receipts are 5% or less of total receipts     (i.e.,atleast 95% digital) — go fully digital to protect the 75 lakh limit.

  • Compare presumptive taxation vs actual books annually — if your real expense ratio exceeds 50%, maintaining books may work out better than presumption.


Above 75 lakh

  • The presumptive option is no longer available — books of account must be maintained, and tax audit applies as per thresholds.
  • This is the bracket where structure (not sections) drives savings — a personalised structuring exercise is recommended.


5. Presumptive (Section 58) vs Regular Books — When to Switch
 

               Factor

     Presumptive (Sec 58)

           Regular Books

     Deemed/Actual income

 

50% of receipts (or actual profit, if higher)

    Actual profit per books

 

     Books of account

       Not required

        Mandatory

 

              Audit

  Not required (within limits)

Applicable per thresholds

 

          Best when

Real expenses BELOW 50% of receipts

Real expenses ABOVE 50% (staff-heavy clinic,rented premises, equipment EMIs)

 

        Eligibility ceiling
  • 50L.  75L if cash  £5%

No ceiling

 

           Advance tax

Single instalment — 15 March

Four instalments

           Switch trigger

                        —

Expense ratio >50% for 2+ consecutive years, or receipts crossing 75L


6. If You Move to Regular Books — Deductions Commonly Missed

Relevant only once you maintain regular books; under presumption, the 50% deemed expense already covers these.

  • Home-office proportionate costs — rent, electricity and maintenance for the portion of your home genuinely used for practice.
  • Vehicle running & depreciation — professional-use proportion of fuel, insurance, servicing and depreciation.
  • Professional indemnity insurance premiums.
  • Memberships, council fees & journals (e.g., council/institute fees, subscriptions, professional databases).
  • CME, conferences & related travel — registration, travel and stay for genuine professional development, with documentation.
  • Salary to family members — deductible ONLY for genuine work at reasonable, market-aligned pay with attendance/work records (else clubbing provisions apply).
  • Mobile, internet & software subscriptions — the business-use share of practice-management tools, SaaS, cloud storage, professional apps.
  • Depreciation on equipment — medical equipment, computers and peripherals at prescribed rates; maintain a fixed-asset register.
  • Interest on practice loans — for clinic/office premises, equipment or working capital.
  • Website, marketing & patient/client communication — within your profession's ethics and advertising norms.

    7. Cautions & Safeguards
     
  • You must declare 50% of receipts OR your actual profit, whichever is HIGHER. If your actual profit is above 50% and you still declare only 50%, this is not planning — it is under-declaration.
  • The 50% presumption is a floor, not a hiding spot — bank statements and other data are visible to the tax department.
  • Do not forget the single advance tax instalment deadline of 15 March — missing it attracts interest.
  • Delay in GST registration after crossing the applicable turnover threshold comes with a penalty — track your turnover continuously.