Section 44AD Presumptive Tax Calculator

For Eligible Businesses (Not Professionals) - FY 2026-27

Determine your minimum declarable taxable income without maintaining complex books of accounts. The new limit for 44AD is ₹3 Crore (if cash receipts are up to 5%) and ₹2 Crore otherwise. The profit presumed is 6% on Digital/Bank Turnover and 8% on Cash Turnover.

Calculate Income | How 44AD Works | FAQs

Annual Business Turnover

Enter your gross receipts split by the mode of payment.

UPI, NEFT, RTGS, Account Payee Cheques, Cards

₹

Cash payments, bearer cheques, unverified modes

₹

Optional: Your Actual Net Profit

If your actual profit is higher than the minimum presumptive limit, you should declare the higher amount.

₹

Minimum Presumptive Income

ITR-4
₹0

Final Income to Declare: ₹0

Digital Income (6%) ₹0
Cash Income (8%) ₹0
Total Turnover ₹0
Digital (%) Cash (%)
Cash receipt is under 5%. Eligible for 3 Cr limit.

Use this income directly in your ITR-4 filing. Calculations are indicative. Consult a CA for complex business setups.

Understanding Section 44AD

Section 44AD of the Income Tax Act is a blessing for small business owners in India. It is a presumptive taxation scheme that eliminates the need for maintaining exhaustive books of accounts and saves the cost and hassle of a tax audit. Under this scheme, the government "presumes" your minimum profit based on your total turnover.

The ₹3 Crore Enhanced Limit (New Rules)

Historically, the maximum turnover allowed to opt for Section 44AD was ₹2 Crore. To promote a cashless economy, the government introduced an enhanced limit.

  • Standard Limit: ₹2 Crore for any eligible business.
  • Enhanced Limit: ₹3 Crore, provided that the total amount received in cash during the year does not exceed 5% of the total turnover.

Note: If your turnover is ₹2.5 Crore but your cash receipts are 10% (which is > 5%), you are NOT eligible for Section 44AD and must get your accounts audited.

Presumptive Profit Rates: 6% vs 8%

Mode of Receipt Presumptive Profit Rate Examples
Digital / Banking Channels 6% of Turnover Account Payee Cheque, Draft, NEFT, RTGS, IMPS, UPI, Credit/Debit Cards.
Cash / Other Modes 8% of Turnover Physical Cash, Bearer Cheques, Cross Cheques (not account payee).

Who CANNOT opt for Section 44AD?

  • Professionals (Doctors, Lawyers, Architects, Freelancers, etc.). They must use Section 44ADA.
  • People earning income in the nature of commission or brokerage.
  • People running an agency business.
  • People in the business of plying, hiring, or leasing goods carriages (They use Section 44AE).
  • Companies (Private Limited, Public Limited) and Limited Liability Partnerships (LLPs).

The "5-Year Lock-in" Trap

If you opt for Section 44AD in a financial year, you should continue with it for the next 5 years. If in any of the next 5 years you decide to declare profit lower than 6%/8% (and thus fall out of 44AD), you will be blocked from using Section 44AD for the subsequent 5 financial years, and you will have to undergo tax audit for those years if your income exceeds the basic exemption limit.

Frequently Asked Questions

What is Section 44AD of the Income Tax Act?
Section 44AD is a presumptive taxation scheme that relieves small businesses from the burden of maintaining extensive books of accounts and getting them audited. Instead, a fixed percentage of the turnover is presumed as the minimum taxable income.
What is the new turnover limit for Section 44AD?
The standard turnover limit is ₹2 Crore. However, this limit is enhanced to ₹3 Crore if the total cash receipts during the financial year do not exceed 5% of the total turnover.
What are the rates for presumptive income under 44AD?
The rate is 6% for turnover received via digital means (banking channels, UPI, NEFT, RTGS) and 8% for turnover received in cash or other modes.
Can I declare an income higher than 6% or 8%?
Yes, absolutely. The 6% and 8% rates are only the minimum limits. If your actual net profit is higher than the presumptive limit, you are legally required to declare the higher actual profit.
What happens if I declare an income lower than 6% or 8%?
If you claim that your profits are lower than the minimum presumptive rates, you cannot opt for Section 44AD. You will be required to maintain regular books of accounts under Section 44AA and undergo a tax audit by a CA under Section 44AB (if your total income exceeds the basic exemption limit).
Are professionals eligible for Section 44AD?
No, Section 44AD is exclusively for eligible businesses (like retail trading, manufacturing, etc.). Professionals (like doctors, lawyers, architects, software freelancers) must use Section 44ADA, which presumes income at 50% of gross receipts.
Who is eligible to opt for Section 44AD?
Resident Individuals, Hindu Undivided Families (HUFs), and Resident Partnership Firms (excluding LLPs) carrying on eligible businesses can opt for Section 44AD. Companies and LLPs are not eligible.
Can I claim business expenses if I opt for 44AD?
No. When you opt for Section 44AD, it is assumed that all your business expenses (rent, salary, depreciation, etc.) have already been deducted. You cannot claim any further business expenses against the presumptive income.

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