Presumptive tax for freelancers and professionals
Who can declare income at a fixed percentage under Sections 44AD and 44ADA (Section 58 of the Income-tax Act, 2025), the 50%, 6% and 8% rates, the turnover limits and cash test, the single 15 March advance tax date, ITR-4 or ITR-3, and when a tax audit still applies.
Published by SKAG and Associates · Page maintained by CA Gaurav Singh (ICAI M.No. 539050) · Last updated: 30 October 2026
Note: General information on the law as at 30 October 2026. This is not a substitute for professional advice.
Presumptive taxation lets a small business or professional declare income as a fixed share of turnover or receipts instead of working out actual profit from detailed books. All business expenses and depreciation are treated as already allowed. It suits freelancers and small practices with modest expenses, but it has limits, a cash test and, for businesses, a five-year lock-in. To test your own figures, use the presumptive tax calculator.
Who qualifies
| Point | Section 44ADA (profession) | Section 44AD (business) |
|---|---|---|
| Eligible persons | Resident individuals and partnership firms (not LLPs) | Resident individuals, HUFs and partnership firms (not LLPs) |
| Activity | A profession listed in Section 44AA(1): legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration and professions notified by the CBDT; from Tax Year 2026-27, the professions in Section 62(4) of the 2025 Act, which also names information technology and company secretary | Any business except those professions, commission or brokerage, agency business and plying goods carriages (Section 44AE) |
| Limit (FY 2025-26) | Gross receipts up to Rs 75 lakh if cash receipts are within 5% of the total; otherwise Rs 50 lakh | Turnover up to Rs 3 crore if cash receipts are within 5% of the total; otherwise Rs 2 crore |
| Presumed income | 50% of gross receipts, or more if declared | 8% of turnover; 6% of the part received by account payee cheque, bank draft, bank transfer or other prescribed electronic modes |
| Income-tax Act, 2025 | Section 58(2), Table serial number 3 (specified profession under Section 62(4)) | Section 58(2), Table serial number 1 (lock-in in Section 58(7)) |
Limits and rates as stated in the Income Tax Department’s ITR-4 FAQs. Section 58 of the Income-tax Act, 2025 carries the same rates and limits for Tax Year 2026-27.
Some freelancers, such as designers, writers or online tutors, may not fall within the listed or notified professions. If they do not, Section 44ADA is not available, and whether Section 44AD can be used depends on whether the activity is a business and not a specified profession. This turns on the facts of each case, so settle it before choosing a scheme.
The cash test for the higher limits
The higher limits of Rs 3 crore and Rs 75 lakh apply only where the amount received in cash does not exceed 5% of total turnover or gross receipts for the year. A professional with Rs 60 lakh of receipts, of which Rs 4 lakh (6.7%) came in cash, falls back to the Rs 50 lakh limit and cannot use Section 44ADA for that year.
Advance tax by 15 March
A person declaring presumptive income does not follow the four-instalment schedule. The whole advance tax for the year can be paid in one instalment by 15 March, and anything paid by 31 March is also treated as advance tax. Under the Income-tax Act, 2025 the instalments are in Section 408 and the interest for deferment in Section 425. The advance tax calculator works out the amount, and the advance tax guide explains the interest.
GST is a separate test
Presumptive income tax does not change GST. In Delhi a supplier of services must register once aggregate turnover crosses Rs 20 lakh in a financial year, and a supplier of goods only once it crosses Rs 40 lakh, with some cases needing registration from the first sale. Receipts for Section 44ADA and turnover for Section 44AD are taken without the GST collected. See the GST registration limit guide.
ITR-4 or ITR-3
- ITR-4 (Sugam): resident individuals, HUFs and firms (other than LLPs) with presumptive income and total income up to Rs 50 lakh, and no income that ITR-4 excludes (for example more than one house property).
- ITR-3: individuals and HUFs with business or professional income who cannot use ITR-4, including those declaring less than the presumptive rate with books of account.
- ITR-5: partnership firms that cannot use ITR-4.
The ITR form selector walks through the conditions. For AY 2026-27, the due date for non-audit business or professional income was 31 August 2026.
When a tax audit still applies
- Profession: declaring less than 50% of gross receipts, where total income exceeds the basic exemption limit, needs books and a tax audit.
- Business: a person who opted for Section 44AD and then declares less than the presumptive rate within five years is shut out of the scheme for the next five years, and needs books and an audit if total income exceeds the basic exemption limit (Section 58(7) and (8) of the 2025 Act carry the same lock-in).
- Above the scheme limits: the normal audit tests apply, such as turnover above Rs 1 crore (Rs 10 crore where cash receipts and payments are each within 5%) or professional receipts above Rs 50 lakh.
The audit rules, forms and due dates are in the tax audit guide (Section 44AB / Section 63).
Worked examples
1. Architect with Rs 48 lakh of receipts. A resident architect in Dwarka received Rs 48 lakh in FY 2025-26, all by bank transfer. Receipts are within Rs 75 lakh and cash is nil, so Section 44ADA applies. Presumptive income is 50% of Rs 48 lakh, that is Rs 24 lakh, unless a higher figure is declared. Total income is under Rs 50 lakh, so ITR-4 can be used. Receipts above Rs 20 lakh also mean GST registration is needed for the services.
2. Trader with Rs 2.6 crore of turnover. A Delhi trader’s turnover is Rs 2.6 crore, of which Rs 7.8 lakh (3%) was received in cash. Cash is within 5%, so the Rs 3 crore limit applies. Presumptive income is 6% of Rs 2,52,20,000 (Rs 15,13,200) plus 8% of Rs 7,80,000 (Rs 62,400), a total of Rs 15,75,600.
3. Leaving the scheme early. A shop owner who declared income under Section 44AD for FY 2024-25 declares only 4% of turnover for FY 2025-26. Because this is within the five-year lock-in, Section 44AD cannot be used again for the next five years, and if total income exceeds the basic exemption limit the books must be audited for FY 2025-26.
Examples are illustrations of how the rules apply; the tax itself depends on the regime, deductions and other income. The presumptive tax calculator computes it.
Frequently Asked Questions
Can every freelancer use Section 44ADA?
No. Section 44ADA is limited to resident individuals and partnership firms (not LLPs) carrying on a profession listed in Section 44AA(1): legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, and the other professions notified by the CBDT under it. From Tax Year 2026-27, Section 62(4) of the Income-tax Act, 2025 also names information technology and company secretary in the Act itself. Whether a particular freelance activity falls in the list depends on the facts.
What is the receipts limit for Section 44ADA for FY 2025-26?
Gross receipts of up to Rs 75 lakh, where cash receipts do not exceed 5% of total gross receipts; otherwise Rs 50 lakh. The income is taken at 50% of gross receipts, or a higher amount if you declare it.
Do presumptive taxpayers pay advance tax in four instalments?
No. A person declaring income under Section 44AD or 44ADA can pay the whole advance tax for the year in one instalment by 15 March. Tax paid by 31 March is also treated as advance tax. Missing the date leads to interest for deferment and, if less than 90% is paid by 31 March, interest for default.
Which return form does a presumptive taxpayer file?
ITR-4 (Sugam), if the person is a resident individual, HUF or firm (other than an LLP) with total income up to Rs 50 lakh and meets the other ITR-4 conditions. Otherwise an individual or HUF files ITR-3, and a firm files ITR-5.
Does GST registration change the presumptive income?
No. GST and income tax are separate. A professional with receipts above Rs 20 lakh in a year usually has to register for GST in Delhi, whether or not the income is offered on a presumptive basis, and the receipts used for Section 44ADA are taken without the GST collected.
What happens if I declare less than the presumptive rate?
For a profession, declaring less than 50% of receipts means you must keep books and get them audited if total income exceeds the basic exemption limit. For a business that opted for Section 44AD and then declares less within the five-year lock-in, the scheme is not available for the next five years, and books and audit are needed if income exceeds the basic exemption limit. Section 58(7) and (8) of the Income-tax Act, 2025 carry the same lock-in from Tax Year 2026-27.