Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
50% of receipts
The computation is deliberately simple: taxable income = 50% of gross receipts. So a professional with ₹40 lakh of receipts is taxed on ₹20 lakh. The remaining 50% is deemed to be all expenses — rent, staff, depreciation, everything — so you don’t separately claim any of them. Tax is then charged on that ₹20 lakh at your normal slab rates.
The floor and the catch
The 50% is a minimum presumed profit: you may declare higher if your actual income exceeds it. But to declare lower than 50%, you lose the simplicity — you must maintain books and undergo a tax audit (if income exceeds the basic exemption). So 44ADA mainly benefits professionals whose real costs are under 50%. Confirm the conditions before opting in or out.
A worked example
Example: a doctor with ₹50 lakh receipts and only ₹12 lakh of actual expenses declares ₹25 lakh (50%) under 44ADA — taxed on ₹25 lakh, even though she really earned ₹38 lakh. That’s a saving and a simplification. A professional with very high genuine costs (over 50%) might prefer normal computation with books. Our team can model which suits you.