Question
I am a small trader or freelancer and want to declare income on a presumptive basis. What are the limits?
Answer
Under Section 44AD, businesses can use presumptive taxation up to Rs 2 crore turnover, extended to Rs 3 crore if cash receipts are 5% or less of total receipts. Under Section 44ADA, professionals can use it up to Rs 50 lakh, extended to Rs 75 lakh on the same 5% cash condition. Section 44AD presumes income at 8% of turnover (6% for digital receipts); Section 44ADA presumes 50% of gross receipts. This removes the need for detailed books or a tax audit, subject to conditions. LLPs cannot use 44ADA, and once you opt in under 44AD you should generally continue for five years.
This answer is general information based on the law as it stood when written and is not professional advice on your specific situation. Verify the current position and consult a qualified professional before acting. See our disclaimer.