Section 44ADA: how freelancers and professionals pay tax on 50% of receipts
Under section 44ADA, a freelancer or professional can treat 50% of gross receipts as profit and pay tax only on that, without keeping detailed books or getting an audit. For many consultants, designers, developers and doctors it's the simplest and cheapest way to file. The section numbers here are from the Income-tax Act 1961, which covers FY 2025-26; the Income-tax Act 2025 carries the scheme forward under new numbers.
Who can use section 44ADA?
Resident individuals and partnership firms (not LLPs) in a specified profession: legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, film artists, company secretaries and other notified professions, including information technology. Receipts must be up to ₹50 lakh, or ₹75 lakh if cash receipts are 5% or less of the total.
How much tax will I pay? A worked example
Say you received ₹30 lakh from clients in the year and have no other income.
| New regime | Old regime | |
|---|---|---|
| Profit under 44ADA (50%) | ₹15,00,000 | ₹15,00,000 |
| Tax including 4% cess | ₹1,09,200 | ₹2,73,000 |
Your real expenses don't matter: whether you spent ₹2 lakh or ₹12 lakh running the practice, tax is on ₹15 lakh. If your actual profit is much lower than 50%, you can keep books and declare the real figure instead, but then you'll need a tax audit if your income is above the basic exemption limit.
Do I still need to pay advance tax?
Yes, if your tax after TDS will be ₹10,000 or more, but under 44ADA it's a single payment: the whole year's tax by 15 March. Clients in India usually deduct 10% TDS from professional fees (2% for technical services); that counts towards your tax, so subtract it first.
Which ITR form do I file?
ITR-4 if your total income is up to ₹50 lakh and nothing else rules it out (such as foreign assets, crypto or capital gains beyond ₹1.25 lakh of long-term equity gains). Otherwise ITR-3, where you still declare income under 44ADA.
What about GST?
Income tax and GST are separate. You need GST registration once your turnover from services crosses ₹20 lakh in a year (₹10 lakh in some north-eastern and hill states). Services exported to clients abroad are zero-rated but still count towards the limit.