Section 44ADA Sweet Spot
50% deemed income with minimal tax and zero audit
What is This Hack?
Earn up to ₹24 lakh with 50% deemed income (₹12 lakh), use ₹75,000 standard deduction in new regime for minimal tax and zero audit requirement
How It Works
Section 44ADA allows professionals (doctors, CAs, lawyers, freelancers, consultants) to declare only 50% of gross receipts as taxable income without maintaining books of accounts. Combined with the new tax regime's ₹75,000 standard deduction and ₹7 lakh basic exemption, you can earn up to ₹24 lakh gross with minimal tax. No audit required if you stay within ₹75 lakh turnover (₹50 lakh if less than 95% digital receipts). This is perfect for freelancers who want simplified taxation without expense tracking hassles.
Real Example: Freelance Developer
Situation
Priya is a freelance web developer earning ₹20 lakh annually from international clients. All receipts via Wise (digital).
Without This Hack
Regular taxation: Must maintain books, track every expense, pay quarterly advance tax. Complex compliance. Eligible for audit if expenses exceed norms. Taxable income ₹15L after claiming ₹5L expenses. Tax: ₹3.75 lakhs + compliance costs.
With This Hack
Using 44ADA: Taxable income = 50% of ₹20L = ₹10L. Minus ₹75K standard deduction = ₹9.25L taxable. Tax: ₹2.2 lakhs. Zero compliance burden. Single advance tax payment. No audit risk.
💰 ₹1.55 lakhs tax + ₹50K compliance costs saved = ₹2.05 lakhs total
Common Pitfalls to Avoid
- Cannot claim actual expenses - stuck with 50% deemed profit even if expenses are higher
- Digital receipt percentage calculated per financial year - track carefully
- Threshold is per professional, not per business - can't split income
- Once you opt for 44ADA, must continue for 5 years unless income exceeds threshold
- Foreign clients still need GST registration for export of services
Prerequisites & Requirements
- Must be specified professional (not applicable to trading/manufacturing)
- Gross receipts should not exceed ₹75 lakh (₹50L if <95% digital)
- 95%+ receipts via digital mode for higher threshold
- Indian tax residency
- PAN card
- Bank account for advance tax payment
Key Benefits
- Potential savings: ₹2-4 lakhs annually
- Implementation time: 1 hour
- Legal status: fully legal
- Risk level: low
Related Topics
Related Articles
Section 44ADA: Presumptive Taxation for Freelancers
How freelancers can save tax using Section 44ADA with 50% deemed profit
Business Registration in India: Complete Guide for 2024
Step-by-step guide to registering your business in India
GST Export Services: LUT Filing Guide for Zero-Rated Supplies
Complete guide to filing LUT (RFD-11) for exporting services without IGST
Related Hacks
Step-by-Step Guide
Verify Eligibility
Ensure you're a specified professional: doctor, engineer, CA, architect, lawyer, consultant, or freelancer providing professional services. Not applicable to business income.
Maintain 95%+ Digital Receipts
Receive at least 95% of payments via UPI, net banking, or cheques to qualify for ₹75L threshold. Below 95% digital = ₹50L threshold only.
Calculate Deemed Income
Your taxable income = 50% of gross receipts. E.g., if you earn ₹24 lakh, only ₹12 lakh is taxable.
Choose New Tax Regime
Opt for new regime to get ₹75,000 standard deduction. This reduces taxable income to ₹11.25L (₹12L - ₹75K).
Pay Advance Tax by March 15
Unlike others who pay quarterly, 44ADA allows single advance tax payment by March 15. No interest penalty.
File ITR-4 (Sugam)
Simple ITR form for presumptive income. No need to submit P&L, balance sheet, or detailed expenses. Just declare gross receipts.