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Presumptive tax for small business — Section 44AD

✍️ Answered by EaseValue Advisors · Updated 17 Jul 2026 · 4-min read
Quick answer

A small business (not a profession) with turnover up to ₹2 crore — ₹3 crore if cash receipts are ≤5% — can declare 8% of turnover (6% for digital/bank receipts) as income under Section 44AD, with no books and no audit, filing ITR-4.

The scheme

  • Declare 8% of turnover as profit (6% for receipts through banking/digital modes).
  • Turnover limit ₹2 crore (₹3 crore if cash is ≤5% of receipts).
  • No books of account, no tax audit. File ITR-4.
  • You may declare a higher profit if real profit is more.

"How do I report my bank balance / turnover?"

Under presumptive you don't file full accounts, but ITR-4 asks for a few summary figures as on 31 March — total debtors, creditors, stock-in-trade, and cash + bank balance. Enter your actual bank and cash balances; they don't drive the tax (income is the % of turnover), but they should be genuine.

The 5-year lock-in

If you opt into 44AD, you should continue for 5 years. Opting out earlier (declaring lower profit) means books + audit for the next 5 years if your income exceeds the exemption.

Related

Professionals use Section 44ADA; transporters use Section 44AE.

General information based on the Income-tax Act as it stands, not advice on your specific case. Tax outcomes depend on your exact facts and residential status. © EaseValue Advisors LLP.
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