My client is a professional with gross receipts of about Rs 62 lakh, nearly all banked. Can he still use s.44ADA, and if he wants to declare less than fifty per cent, must he be audited?
Section 44ADA deems fifty per cent of the total gross receipts of a resident individual or partnership firm (not an LLP) engaged in a profession referred to in s.44AA(1) to be the profits of that profession, where gross receipts do not exceed fifty lakh rupees — raised to seventy-five lakh rupees where cash receipts do not exceed five per cent of gross receipts. By s.44ADA(4), a professional who claims profits LOWER than the deemed fifty per cent must keep books under s.44AA(1) and get them audited under s.44AB only if his total income exceeds the maximum amount which is not chargeable to income-tax.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2024-04-01, reported as Income-tax Act 1961, s.44ADA, with the provisos to sub-section (1) inserted by the Finance Act 2023 (Act No. 8 of 2023) with effect from 1 April 2024; read with s.44AB clause (d). It bears on section 44ADA, section 44ADA(1), section 44ADA(4), section 44AA, section 44AA(1), section 44AB, section 44AD, section 44AD(6) of the Income Tax Act 1961, in Presumptive Taxation & Audit, How Tax Law Is Read and Cash Transaction Limits matters.
Two points decide most s.44ADA disputes. The first is the gateway: s.44ADA is available only to a person 'engaged in a profession referred to in sub-section (1) of section 44AA' — the closed list of legal, medical, engineering, architectural, accountancy, technical consultancy and interior decoration, plus professions notified by the Board. Whether a particular activity is on that list decides not only s.44ADA but also s.44AD, because s.44AD(6)(i) throws the same professionals out of the business scheme. The two sections are the two halves of one gate, and an Assessing Officer who moves a return from s.44AD to s.44ADA under s.143(1)(a) is deciding that gateway question without the enquiry it needs. The second point is the structure of s.44ADA(4), which is the mirror of s.44AD(5) and carries the same overlooked qualifier: the books-and-audit duty arises only where the professional both claims a lower figure AND has total income above the exemption limit. Note the difference from s.44AD: s.44ADA has no five-year lock-out. A professional who comes off the scheme in one year is not disqualified for the following five. Note too that s.44AB clause (d) is the audit trigger for a s.44ADA professional who claims a lower figure, and it repeats the same income condition.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Section 44ADA(1) provides, notwithstanding anything contained in ss.28 to 43C, that in the case of an assessee being an individual or a partnership firm other than a limited liability partnership as defined in s.2(1)(n) of the Limited Liability Partnership Act 2008, who is resident in India and is engaged in a profession referred to in s.44AA(1) and whose total gross receipts do not exceed fifty lakh rupees in a previous year, a sum equal to fifty per cent of the total gross receipts, or a higher sum claimed to have been earned, shall be deemed to be the profits and gains of that profession chargeable under the head Profits and gains of business or profession. The first proviso substitutes seventy-five lakh rupees for fifty lakh rupees where the amount or aggregate of amounts received during the previous year in cash does not exceed five per cent of total gross receipts; the second proviso deems receipt by a cheque drawn on a bank or by a bank draft which is not account payee to be receipt in cash. Sub-section (2) forecloses further deduction under ss.30 to 38; sub-section (3) deems written down value to have been computed as if depreciation had been claimed and allowed. Sub-section (4) provides, notwithstanding the foregoing provisions, that an assessee who claims that his profits and gains from the profession are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax shall be required to keep and maintain such books of account and other documents as required under s.44AA(1) and get them audited and furnish a report of such audit as required under s.44AB. Section 44AB clause (d) makes the same case auditable in the same terms.
Not applicable — statutory provision. The operative rules are that s.44ADA is confined to resident individuals and non-LLP firms carrying on a profession referred to in s.44AA(1); that the ceiling is fifty lakh rupees of gross receipts, raised to seventy-five lakh rupees only where cash receipts (including receipts by non-account-payee cheque or draft) do not exceed five per cent; that the presumptive figure is fifty per cent; and that the books-and-audit duty under sub-section (4) arises only where the professional claims a lower figure AND his total income exceeds the maximum amount not chargeable to income-tax.
Not applicable — statutory provision. What follows is this library's reading of the statutory words and is not authority. The eligibility limb is drafted by reference to another section rather than by its own list — 'engaged in a profession referred to in sub-section (1) of section 44AA' — so the content of the gate is whatever s.44AA(1) contains, and the same reference appears in s.44AD(6)(i) to exclude those professionals from the business scheme. Sub-section (4) is drafted in two cumulative limbs joined by 'and', in the same shape as s.44AD(5) and s.44AB clause (d), so a professional who claims a lower figure but whose total income is at or below the exemption limit is outside the obligation. Unlike s.44AD, s.44ADA contains no provision corresponding to s.44AD(4), so nothing in the section disqualifies a professional for later years by reason of his having declared below fifty per cent in one year.
Provided that in case of an assessee where the amount or aggregate of the amounts received during the previous year, in cash, does not exceed five per cent of the total gross receipts of such previous year, this sub-section shall have effect as if for the words "fifty lakh rupees", the words "seventy-five lakh rupees" had been substituted:
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Handle my notice → Ask a CA on WhatsAppSection 44ADA deems fifty per cent of the total gross receipts of a resident individual or partnership firm (not an LLP) engaged in a profession referred to in s.44AA(1) to be the profits of that profession, where gross receipts do not exceed fifty lakh rupees — raised to seventy-five lakh rupees where cash receipts do not exceed five per cent of gross receipts. By s.44ADA(4), a professional who claims profits LOWER than the deemed fifty per cent must keep books under s.44AA(1) and get them audited under s.44AB only if his total income exceeds the maximum amount which is not chargeable to income-tax. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 44ADA, section 44ADA(1), section 44ADA(4), section 44AA, section 44AA(1), section 44AB, section 44AD, section 44AD(6) of the Income Tax Act 1961. It is reported as Income-tax Act 1961, s.44ADA, with the provisos to sub-section (1) inserted by the Finance Act 2023 (Act No. 8 of 2023) with effect from 1 April 2024; read with s.44AB clause (d). Two points decide most s.44ADA disputes. The first is the gateway: s.44ADA is available only to a person 'engaged in a profession referred to in sub-section (1) of section 44AA' — the closed list of legal, medical, engineering, architectural, accountancy, technical consultancy and interior decoration, plus professions notified by the Board. Whether a particular activity is on that list decides not only s.44ADA but also s.44AD, because s.44AD(6)(i) throws the same professionals out of the business scheme. The two sections are the two halves of one gate, and an Assessing Officer who moves a return from s.44AD to s.44ADA under s.143(1)(a) is deciding that gateway question without the enquiry it needs. The second point is the structure of s.44ADA(4), which is the mirror of s.44AD(5) and carries the same overlooked qualifier: the books-and-audit duty arises only where the professional both claims a lower figure AND has total income above the exemption limit. Note the difference from s.44AD: s.44ADA has no five-year lock-out. A professional who comes off the scheme in one year is not disqualified for the following five. Note too that s.44AB clause (d) is the audit trigger for a s.44ADA professional who claims a lower figure, and it repeats the same income condition. If it applies to you, the first step is this: Test the gateway first: is the activity within the closed list in s.44AA(1)? If it is not, the client is not a s.44ADA professional and, subject to s.44AD(6)(ii) and (iii), s.44AD is the right section.
Section 44ADA(1) provides, notwithstanding anything contained in ss.28 to 43C, that in the case of an assessee being an individual or a partnership firm other than a limited liability partnership as defined in s.2(1)(n) of the Limited Liability Partnership Act 2008, who is resident in India and is engaged in a profession referred to in s.44AA(1) and whose total gross receipts do not exceed fifty lakh rupees in a previous year, a sum equal to fifty per cent of the total gross receipts, or a higher sum claimed to have been earned, shall be deemed to be the profits and gains of that profession chargeable under the head Profits and gains of business or profession. The first proviso substitutes seventy-five lakh rupees for fifty lakh rupees where the amount or aggregate of amounts received during the previous year in cash does not exceed five per cent of total gross receipts; the second proviso deems receipt by a cheque drawn on a bank or by a bank draft which is not account payee to be receipt in cash. Sub-section (2) forecloses further deduction under ss.30 to 38; sub-section (3) deems written down value to have been computed as if depreciation had been claimed and allowed. Sub-section (4) provides, notwithstanding the foregoing provisions, that an assessee who claims that his profits and gains from the profession are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax shall be required to keep and maintain such books of account and other documents as required under s.44AA(1) and get them audited and furnish a report of such audit as required under s.44AB. Section 44AB clause (d) makes the same case auditable in the same terms. The matter was decided on 2024-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Not applicable — statutory provision. The operative rules are that s.44ADA is confined to resident individuals and non-LLP firms carrying on a profession referred to in s.44AA(1); that the ceiling is fifty lakh rupees of gross receipts, raised to seventy-five lakh rupees only where cash receipts (including receipts by non-account-payee cheque or draft) do not exceed five per cent; that the presumptive figure is fifty per cent; and that the books-and-audit duty under sub-section (4) arises only where the professional claims a lower figure AND his total income exceeds the maximum amount not chargeable to income-tax.
Not applicable — statutory provision. What follows is this library's reading of the statutory words and is not authority. The eligibility limb is drafted by reference to another section rather than by its own list — 'engaged in a profession referred to in sub-section (1) of section 44AA' — so the content of the gate is whatever s.44AA(1) contains, and the same reference appears in s.44AD(6)(i) to exclude those professionals from the business scheme. Sub-section (4) is drafted in two cumulative limbs joined by 'and', in the same shape as s.44AD(5) and s.44AB clause (d), so a professional who claims a lower figure but whose total income is at or below the exemption limit is outside the obligation. Unlike s.44AD, s.44ADA contains no provision corresponding to s.44AD(4), so nothing in the section disqualifies a professional for later years by reason of his having declared below fifty per cent in one year. In the words reproduced by the source cited on this page: "Provided that in case of an assessee where the amount or aggregate of the amounts received during the previous year, in cash, does not exceed five per cent of the total gross receipts of such previous year, this sub-section shall have effect as if for the words "fifty lakh rupees", the words "seventy-five lakh rupees" had been substituted:"
It was decided by the CBDT Circulars & Instructions on 2024-04-01 and is reported as Income-tax Act 1961, s.44ADA, with the provisos to sub-section (1) inserted by the Finance Act 2023 (Act No. 8 of 2023) with effect from 1 April 2024; read with s.44AB clause (d). Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 44ADA, section 44ADA(1), section 44ADA(4), section 44AA, section 44AA(1), section 44AB, section 44AD, section 44AD(6), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Not applicable — statutory provision. The operative rules are that s.44ADA is confined to resident individuals and non-LLP firms carrying on a profession referred to in s.44AA(1); that the ceiling is fifty lakh rupees of gross receipts, raised to seventy-five lakh rupees only where cash receipts (including receipts by non-account-payee cheque or draft) do not exceed five per cent; that the presumptive figure is fifty per cent; and that the books-and-audit duty under sub-section (4) arises only where the professional claims a lower figure AND his total income exceeds the maximum amount not chargeable to income-tax. It arises in Presumptive Taxation & Audit, How Tax Law Is Read and Cash Transaction Limits matters, on section 44ADA, section 44ADA(1), section 44ADA(4), section 44AA, section 44AA(1), section 44AB, section 44AD, section 44AD(6) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For the seventy-five lakh ceiling, compute cash receipts as a percentage of total gross receipts and add to the cash side any cheque or bank draft that was not account payee — the second proviso deems those to be cash. If the client wants to declare below fifty per cent, compute total income before assuming an audit is due: s.44ADA(4) and s.44AB(d) both require that total income exceed the maximum amount not chargeable to income-tax. Do not read a five-year lock-out into s.44ADA — there is none; s.44AD(4) has no counterpart in s.44ADA. Where a s.143(1)(a) intimation has re-cast a s.44AD return as a s.44ADA return, take the point that the character of the receipt is not settled by the TDS section under which the payer deducted. Check the year: the seventy-five lakh proviso and the deeming of non-account-payee instruments were inserted by the Finance Act 2023 with effect from 1 April 2024, that is, from AY 2024-25. For AY 2023-24 and earlier the ceiling is fifty lakh rupees flat.
Still good law. This is the text as published by the Income Tax Department on its own section page for s.44ADA, carrying the heading 'Special provision for computing profits and gains of profession on presumptive basis' and the stamp 'Year: 2025', read on 8 September 2026 and corroborated word for word against the pages stamped 'Year: 2023' and 'Year: 2024 (No. 2)'. I did not read the e-Gazette or the bare Finance Act 2023, but the commencement date of the seventy-five lakh proviso is printed on the departmental page stamped 'Year: 2023' as an editorial note attributing both provisos to the Finance Act 2023 with effect from 1-4-2024, so it does not rest on inference. I could locate no decision construing the seventy-five lakh proviso or s.44ADA(4). Nothing in this entry states any position under the Income-tax Act 2025. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This entry is statutory text, not a decision. It asserts no holding, no bench and no judge's words; every quoted string in it is statutory text. The value in decided_on, 1 April 2024, is the commencement date of the Finance Act 2023 amendment inserting the seventy-five lakh proviso and is NOT a decision date. The current text was read on the Income Tax Department's page for s.44ADA carrying the heading 'Special provision for computing profits and gains of profession on presumptive basis' and the stamp 'Year: 2025'. The suffix is not derivable and had to be found by probing: the pages stamped 'Year: 2016' (the bare /w/section-44ada URL), 'Year: 2019 (No. 2)', 'Year: 2020', 'Year: 2021' and 'Year: 2022' are all archived and print the fifty lakh ceiling with no proviso, and must not be used to state current law. The current text was corroborated word for word against the pages stamped 'Year: 2023' and 'Year: 2024 (No. 2)', which print sub-section (1) with both provisos and sub-section (4) in identical words. The commencement date is sourced directly from the s.44ADA pages themselves. The page stamped 'Year: 2023' prints, between sub-section (1) and the provisos, the editorial note 'Following provisos shall be inserted after sub-section (1) of section 44ADA by the Finance Act, 2023, w.e.f. 1-4-2024:' and then both provisos in italics; that page also carries a footnote list, of which footnote 76 reads 'Substituted for "in the case of an assessee, being a resident in India, who" by the Finance Act, 2021, w.e.f. 1-4-2021.' On the current page stamped 'Year: 2025' the first proviso carries footnote marker [34]. The date is therefore read off the departmental page and is not an inference; it is consistent with the footnote on the s.44AD page stamped 'Year: 2024 (No. 2)', which dates the identically worded five per cent cash proviso in s.44AD to Act No. 8 of 2023 with effect from 1-4-2024. The text of s.44AB clause (d) was read on the departmental s.44AB pages stamped 'Year: 2026' and 'Year: 2024 (No. 1)'. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Not applicable — statutory provision. The operative rules are that s.44ADA is confined to resident individuals and non-LLP firms carrying on a profession referred to in s.44AA(1); that the ceiling is fifty lakh rupees of gross receipts, raised to seventy-five lakh rupees only where cash receipts (including receipts by non-account-payee cheque or draft) do not exceed five per cent; that the presumptive figure is fifty per cent; and that the books-and-audit duty under sub-section (4) arises only where the professional claims a lower figure AND his total income exceeds the maximum amount not chargeable to income-tax.
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