What Is Section 44ADA?

Normally a professional computes profit as receipts less expenses and needs records to prove both. Section 44ADA offers a shortcut. If you qualify, the law deems 50% of your gross receipts to be your profit, and you pay tax on that. No separate deduction for expenses is allowed, but you also do not have to prove them. Fees from foreign clients count as gross receipts like any other fees. People still search for 44ADA, but the Income Tax Department says in its new Act FAQ that sections 44AD, 44ADA and 44AE are consolidated into section 58 of the 2025 Act. Our page on Section 44ADA for freelancers gives the full rules.

For example, a freelance developer receives Rs 20 lakh in the year, all from foreign clients by bank transfer. Under the scheme, 50% or Rs 10 lakh is taken as profit, and tax is computed on that amount at the applicable slab rates. The numbers are hypothetical.

• Income tax: The scheme cuts record keeping and, where you declare at least 50%, avoids a tax audit. The 2025 Act keeps the audit exemption in section 63(2).
• Advance tax: Under section 408(2) of the 2025 Act and the Tax Payments FAQ, the whole advance tax is due in one instalment by 15 March.
• GST: The scheme has no GST effect. Registration and the export of services conditions depend on the IGST and CGST Acts and your LUT.
• Bank compliance: The scheme does not change FEMA rules. Foreign receipts must still be realised through an AD bank, and the bank records, such as the FIRA, support the gross receipts you report.

Section 44ADA works by replacing actual profit with a fixed percentage of gross receipts. You total your professional receipts, take 50% as profit and report that in your return.

1. Check you are a resident individual or partnership firm (other than an LLP) in a specified profession.
2. Total the gross receipts for the year, including fees from foreign clients.
3. Check the total is within the limit. The 1961 Act limit is Rs 50 lakh, or Rs 75 lakh where cash receipts do not exceed 5%, as the Finance Bill 2023 memorandum explains.
4. Take 50% of gross receipts as profit, or declare a higher figure if actual profit is higher.
5. Pay advance tax by 15 March and report the income in the return form for professionals.

You multiply gross receipts by 50% to find deemed profit and then apply your slab rates. The worked figures below are hypothetical and ignore deductions and cess.

1. Add up gross receipts for the year. Say a freelancer has Rs 24,00,000.
2. Multiply by 50%. Deemed profit is Rs 12,00,000.
3. Check actual expenses. If real profit is higher than the deemed figure, declare the higher figure.
4. Subtract any deductions available to you from the deemed profit to reach total income.
5. Apply the slab rates for your regime and tax year, confirm the figures on the Income Tax Department e-filing portal and pay advance tax by 15 March.

Section 44ADA is for professionals and section 44AD is for eligible businesses. They use different deemed profit rates. See 44AD vs 44ADA.

• Foreign fees: Foreign income is not excluded. Fees from foreign clients form part of gross receipts.
• Expenses: Expenses cannot be deducted separately under the scheme. The 50% already stands in for them.
• Old section: Section 44ADA applies to FY 2025-26 income. From tax year 2026-27 the scheme is in section 58.
• Every profession: Only specified professions qualify. Check that your service falls within the list before opting in.

• Presumptive taxation: A way of computing income as a fixed share of receipts.
• Section 44AD vs 44ADA: A comparison of the business and professional schemes.
• ITR form for freelancers: Which return form fits a freelancer.
• Permanent establishment: A taxable presence in another country.
• Withholding tax: Tax deducted at source on a payment.

Every rule and definition on this page is linked to its official source, checked on the dates below.

1. The Income-tax Act, 2025 (Gazette of India, 21 August 2025), Sections 58(2) Table serial number 3, 63(2), 408(2) (checked 9 Oct 2026)
2. Income Tax Department: Objective and scope of the New Act, FAQ 25: sections 44AD, 44ADA and 44AE consolidated into section 58 (checked 9 Oct 2026)
3. Income Tax Department: Tax payments FAQs, Advance tax single instalment by 15 March (checked 9 Oct 2026)
4. Finance Bill 2023, Memorandum explaining the provisions, Higher limits for sections 44AD and 44ADA from AY 2024-25 (checked 9 Oct 2026)