Question
Under Section 44AD, can I declare a lower profit, and when does audit apply?
Answer
Bottom line: Section 44AD deems 8% of turnover (6% for digital receipts) as income — declaring less can trigger a tax audit.
1. The scheme
Available for a business with turnover up to ₹2 crore (₹3 crore if cash receipts are 5% or less), taxing a presumptive 8% or 6%.
2. Lower profit
If you declare below the deemed rate and your income exceeds the basic exemption, you must keep books and get a 44AB tax audit.
3. Lock-in
Once you opt out of 44AD, you cannot use it again for the next 5 years.
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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.