Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Presumptive means no audit
Declare the deemed rate (8%/6% for 44AD, 50% for 44ADA) and you skip the audit and detailed books.
Declaring lower triggers audit
If you show less than the presumptive rate and your income is above the basic exemption, you must maintain books and get audited. Confirm current limits.
The trade-off to weigh
Presumptive taxation keeps you out of audit and detailed books, but it has conditions. Under 44AD you generally must stay in the scheme for a run of years — opt out after opting in and you can be locked out for five assessment years and pushed into audit if income exceeds the basic exemption. The deemed rate is also a floor, not a ceiling: if your real margin is lower, presumptive can mean paying tax on profit you didn’t make. Where margins are genuinely thin, maintaining books and getting audited may cost less tax overall. The right choice depends on your actual profitability, so it’s worth a quick comparison each year. Remember too that 44AD is only for resident individuals, HUFs and partnership firms (not companies or LLPs) and excludes certain incomes such as commission, agency and professional receipts — so confirm eligibility before relying on it.