Section 44AD Presumptive Tax Calculator

Presumptive Taxation for Small Businesses (Section 44AD)

The Presumptive Taxation Scheme under Section 44AD of the Income Tax Act is designed to give relief to small taxpayers by freeing them from the tedious task of maintaining detailed books of accounts and undergoing tax audits. Instead of calculating exact profits by deducting every single expense from your revenue, you simply declare a fixed percentage of your turnover as your presumptive income.

Eligibility Criteria

To opt for Section 44AD, you must meet the following criteria:

• You must be a Resident Individual, Hindu Undivided Family (HUF), or a Partnership Firm (excluding LLPs).
• Your business must not be in the nature of plying, hiring, or leasing goods carriages (which falls under 44AE).
• You must not be running an agency business or earning income in the nature of commission or brokerage.
• Professionals (doctors, lawyers, architects, etc.) cannot use 44AD; they must use Section 44ADA instead.

The Unique GST Angle: Reconciling Turnover

A massive oversight by many small businesses is the failure to reconcile their presumptive taxation turnover with their GST returns. If you are registered under GST, the Income Tax Department directly cross-verifies the gross receipts you declare under Section 44AD with the outward supplies you reported in your GSTR-1 and GSTR-3B.

If your GST turnover is ₹2.5 Crores, but you declare a gross turnover of only ₹1.8 Crores under Section 44AD, the system will flag a mismatch, triggering an automated scrutiny notice. Therefore, for GST-registered businesses, the turnover declared for presumptive taxation must perfectly align with your annual GST returns (GSTR-9).

Frequently Asked Questions