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Section 44AD: Presumptive Taxation for Businesses.

If you run a small business — trading, retail, services — Section 44AD lets you declare a fixed percentage of turnover as profit. No expense tracking, no audits. Here's the complete guide for FY 2026-27.

How 44AD Works

Section 44AD presumes your business profit is a fixed percentage of your total turnover, depending on how your customers pay you.

CASH RECEIPTS

of turnover = deemed profit

DIGITAL RECEIPTS

of turnover = deemed profit

Example: Your business has ₹40L turnover. 90% digital (₹36L), 10% cash (₹4L).

→ Digital deemed profit: ₹36L × 6% = ₹2,16,000
→ Cash deemed profit: ₹4L × 8% = ₹32,000
→ Total taxable profit: ₹2,48,000 (out of ₹40L turnover)

WHY 6% AND 8%?

Digital payments create a traceable paper trail — the government rewards this with a lower deemed profit rate. Cash is harder to verify, so the rate is higher. The incentive is clear: go digital.

Turnover Thresholds

44AD has two turnover thresholds, depending on your cash-to-digital ratio.

Scenario	Turnover Limit	Condition
General	₹2 Crore	Any payment mix
Digital bonus	₹3 Crore	Cash receipts ≤ 5% of total

If your turnover exceeds these limits, or if you don't want to use the presumptive scheme, you must maintain regular books and may need a tax audit under Section 44AB.

Advance Tax: 15 March

44AD users get the same advance tax simplification as 44ADA: one single installment by 15 March.

44AD / 44ADA USERS

15 March

Pay your entire estimated tax in one shot

If you don't use 44AD/44AD (e.g., regular ITR-3 filer), you must follow the quarterly schedule:

Due Date	Cumulative %
15 June	15%
15 September	45%
15 December	75%
15 March	100%

234B & 234C INTEREST

Missing installments triggers 1% per month interest under Section 234B (shortfall) and 234C (deferment). These are real costs — plan your cash flow accordingly.

When to Leave 44AD

You must stop using 44AD if any of these apply:

TURNOVER EXCEEDS

₹2Cr (general) or ₹3Cr (digital)

AUDIT WAS REQUIRED

In any prior year under Section 44AB

PROFIT < 6%/8%

You want to declare lower than deemed profit

When you leave 44AD:

You cannot re-enter 44AD for the next 5 years if audit was triggered
Maintain full books of accounts
File ITR-3 instead of ITR-4
Follow quarterly advance tax schedule

ITR-4 (Sugam)

If you qualify for 44AD, you file ITR-4 (Sugam) — a simplified form designed for presumptive taxation.

Feature	ITR-4 (Sugam)	ITR-3
Who can use	44AD / 44ADA / 44AE users	Everyone
Total income limit	≤ ₹50L	No limit
Books of accounts	Not required	Required
Complexity	Simple	Complex
Filing deadline	31 July 2027	31 Oct 2027 (if audit)

44AD + 87A COMBO

If your 6%/8% deemed profit is ≤ ₹12L (new regime), you get the 87A rebate and pay ₹0 tax. This is common for small businesses with ₹1.5-2L monthly digital turnover.