How Section 44ADA Works
Under Section 44ADA, a specified professional with gross receipts up to ₹50 lakh — or up to ₹75 lakh where cash receipts do not exceed 5% of gross receipts — can declare 50% of gross receipts as their taxable professional income. This deemed profit of 50% is treated as the net income after all expenses — no separate deduction for rent, salaries, depreciation, professional subscriptions, or any other business expense is allowed. The remaining 50% is presumed to cover all expenses. If the professional's actual profit is higher than 50%, they must declare the actual higher amount. If actual profit is lower than 50%, they can opt out of 44ADA but must then maintain books of accounts under Section 44AA, and get a tax audit under Section 44AB(d) if their income also exceeds the basic exemption limit. Note the first proviso to Section 44AB: a professional who stays within 44ADA and declares at least 50% needs no audit at all, even where gross receipts run past ₹50 lakh, because that proviso disapplies the whole section.
Eligible Professions
Section 44ADA covers professions specified in Section 44AA(1): legal profession (advocates, solicitors, vakils), medical profession (physicians, surgeons, dentists, pathologists, radiologists, physiotherapists, and other medical practitioners), engineering, architecture, accountancy (Chartered Accountants, Cost Accountants, Company Secretaries), technical consultancy (IT professionals, management consultants, software developers providing services), and interior decoration. The CBDT can notify additional professions. Film artists and authorised representatives are also covered under Section 44AA(1) and hence eligible for 44ADA.
Cash Receipt Restriction
Budget 2023 introduced a cash receipt restriction: the enhanced ₹75 lakh limit applies only if cash receipts do not exceed 5% of gross receipts. If more than 5% of gross receipts are received in cash, the limit falls back to ₹50 lakh. This means professionals who receive significant cash payments must either keep cash receipts below 5% of total receipts or ensure total receipts stay below ₹50 lakh to remain eligible for 44ADA. This restriction was introduced to encourage digital payments in professional services.
ITR Form and Advance Tax
Professionals opting for Section 44ADA must file ITR-4 (Sugam). They are exempt from maintaining books of accounts under Section 44AA and from tax audit under Section 44AB. For advance tax, professionals under 44ADA must pay the entire advance tax liability in a single instalment by March 15 (unlike the four-instalment schedule for other taxpayers). If advance tax is not paid by March 15, interest under Section 234C applies at 1% per month on the shortfall. TDS deducted by clients under Section 194J (10% for professional services) is credited against the advance tax liability.