If you run a small business and dread maintaining detailed books, Section 44AD of the Income Tax Act is built for you. This presumptive taxation scheme lets eligible businesses declare income as a fixed percentage of turnover, skipping bookkeeping and tax audits.

WHO CAN OPT IN
Section 44AD is available to resident individuals, Hindu Undivided Families (HUFs), and partnership firms (other than LLPs). Companies, LLPs, and non-residents are excluded. The scheme does not cover professions under Section 44AA(1), agency businesses, goods-carriage operators under Section 44AE, or businesses earning commission or brokerage.

TURNOVER THRESHOLD
The standard turnover limit is Rs 2 crore. If your aggregate cash receipts do not exceed 5% of total turnover, the limit is enhanced to Rs 3 crore. This higher threshold incentivises digital transactions and applies from AY 2024-25 onwards.

DEEMED PROFIT RATES
8% for receipts in cash or non-digital modes.
6% for receipts through digital channels (account payee cheques, bank drafts, ECS, UPI, or other electronic modes) received before the return filing due date.

You may declare higher profits. If you declare lower and your total income exceeds the basic exemption limit, you must maintain books and get them audited under Section 44AB.

NO BOOKS, NO AUDIT
Declare income at or above the prescribed rates and you are exempt from maintaining books under Section 44AA and from audit under Section 44AB.

THE 5-YEAR LOCK-OUT RULE
If you opt into Section 44AD and then opt out before completing five consecutive assessment years, you cannot re-enter the scheme for the next five years.

ADVANCE TAX
Assessees under this scheme need not pay advance tax in quarterly instalments. The entire liability must be paid in one instalment on or before 15th March.

PRACTICAL TIP
Push customers toward digital payments. The 6% deemed rate versus 8% on cash translates to real savings. On Rs 1 crore turnover, going fully digital saves tax on Rs 2 lakh of deemed income.