Who is Eligible for the Presumptive Taxation Scheme?

The Presumptive Taxation Scheme (PTS) under the Income Tax Act, 1961 is a major relief for small businesses, professionals, and freelancers who want to avoid complex books and audits.
But who exactly qualifies for this simplified tax option – and under what limits?

This blog explains who is eligible for Sections 44AD, 44ADA, and 44AE under the presumptive tax scheme for FY 2024-25.

Legal Reference

• Section 44AD, 44ADA, and 44AE, Income Tax Act, 1961
• CBDT Notification No. 111/2023 extending turnover thresholds
• Updated through Finance Act 2024

Who is Eligible for Presumptive Taxation?

Under Section 44AD – For Small Businesses

• Who can opt:
  • Resident Individuals
  • Hindu Undivided Families (HUFs)
  • Resident Partnership Firms (excluding LLPs)
• Eligible businesses:
  • Any business except:
    • Profession as defined under Section 44AA
    • Commission or brokerage
    • Agency business
• Turnover limit:
  • Up to ₹2 crore (standard)
  • Up to ₹3 crore if cash receipts ≤5% of total turnover

Under Section 44ADA – For Specified Professionals

• Who can opt:
  • Resident individuals (not HUFs or firms)
• Eligible professions:
  • Legal, medical, engineering, architecture
  • Accountancy, technical consultancy, interior decoration
  • Other professions notified by CBDT
• Gross receipts limit:
  • Up to ₹50 lakh (standard)
  • Up to ₹75 lakh if cash receipts ≤5%

Under Section 44AE – For Transporters

• Who can opt:
  • Any person owning up to 10 goods vehicles
• Presumed income:
  • ₹1,000 per ton per month for heavy goods vehicle
  • ₹7,500 per month for light goods vehicle

Who is NOT Eligible for Presumptive Taxation?

• LLPs and companies
• Non-residents
• Professionals or businesses with foreign income
• Taxpayers opting for new regime (Section 115BAC) and certain deductions
• Persons who have claimed additional depreciation or SEZ benefits
• Those who opted out of presumptive scheme in last 5 years (for Section 44AD)

Example Scenarios

• Example 1: Suresh runs a retail business with ₹2.9 crore turnover (95% digital)
  • Eligible under 44AD (digital receipts <5%)
• Example 2: Priya is a freelance designer with ₹60 lakh receipts
  • Not eligible under 44ADA (crosses ₹75 lakh cap)
• Example 3: Amit owns 3 trucks
  • Eligible under 44AE

Benefits of Presumptive Taxation

• No requirement to maintain detailed books of accounts
• No audit required under Section 44AB
• Flat income percentage assumed:
  • 44AD: 8% (6% for digital payments)
  • 44ADA: 50% of gross receipts
  • 44AE: Fixed per vehicle per month
• Pay 100% advance tax by 15th March instead of quarterly installments

Conclusion

Presumptive Taxation is ideal for small businesses, professionals, and transporters with modest turnover and digital operations.
By opting in, you can significantly reduce compliance costs, skip audits, and file taxes easily through ITR-4.
However, you must stay within limits and avoid opting in and out frequently.

Call to Action

Wondering if you can avoid tax audits and simplify your return this year?
Presumptive taxation could save time, money, and paperwork.

Book a quick consultation with Anshul Goyal, Chartered Accountant, and find out if Section 44AD or 44ADA works for you.
https://calendly.com/anshulcpa

Disclaimer

This blog is for general guidance only. Eligibility under the presumptive scheme depends on turnover, profession type, and receipt structure. Tax rules are subject to updates.

Anshul Goyal is a Chartered Accountant licensed with the ICAI, India.
Please consult a professional before opting into Section 44AD, 44ADA, or 44AE.

Frequently Asked Questions

1. Can I opt for presumptive taxation if I have international clients?

No. Foreign income may disqualify you from the scheme.

2. Is audit mandatory under presumptive taxation?

No, unless you declare income lower than the presumptive rate and your total income exceeds exemption limits.

3. Can LLPs opt for presumptive scheme?

No. Only individuals, HUFs, and partnership firms (non-LLP) are allowed.

4. Can I claim expenses under presumptive taxation?

No. Income is presumed post-expenses – no additional expense claim allowed.

5. What ITR form should I use?

Use ITR-4 (Sugam) to file under presumptive schemes.