Presumptive tax under Section 44AD — who qualifies and what counts as turnover

Key takeaway

44AD is for small businesses (not specified professions — those use 44ADA). You pay tax on a deemed 8%/6% of turnover and skip books and audit. The two things people get wrong: what counts as turnover, and who's actually eligible.

What counts as turnover

• Only your business sales / gross receipts — the money earned from the business.
• Loans, gifts, capital introduced, transfers between your own accounts and other non-sales deposits do NOT count as turnover. Bank credits ≠ turnover.
• If you're GST-registered, use the actual taxable sales — reconcile with the GST turnover but exclude anything that isn't a business sale. (If your GST turnover is ₹7 lakh of genuine sales, that's your 44AD turnover.)

The rates

• 6% of turnover received digitally (bank/UPI/cheque).
• 8% of turnover received in cash.
• You may declare higher if your real profit is more; to declare less you need books + audit.

Who is eligible

• Resident individuals, HUFs and partnership firms (not LLPs/companies) carrying on any business except plying/hiring goods carriages (that's 44AE).
• Turnover ≤ ₹2 crore (₹3 crore if cash receipts are ≤ 5%).
• Not for specified professions (CA, legal, medical, engineering, etc.) — they use 44ADA.

Grey areas — tuition & consultancy

Coaching/tuition run as a business (a coaching setup) can fall under 44AD; teaching as a profession leans to 44ADA — the facts decide. A non-qualified consultant (e.g. a CA finalist doing consultancy) isn't in a 'specified profession', so 44AD (business) often fits — but get it reviewed, as mis-classification triggers notices.

Forms required

ITR-4. Once you opt in, stay in 44AD for 5 years or lose the benefit and face audit if you opt out early.