Section 44AD vs 44ADA vs 44AE – Choosing the Right Presumptive Taxation Scheme

Understand Key Differences, Applicability, Tax Benefits, and Filing Process (FY 2024-25)

🔍 Introduction

To reduce the burden of maintaining books of accounts and ease tax compliance for small businesses, professionals, and transporters, the Income Tax Act offers simplified presumptive taxation schemes – namely Section 44AD, 44ADA, and 44AE. These sections help eligible taxpayers declare income at a prescribed rate and file returns easily without detailed accounting. Let’s understand how these three differ and which suits you best.

📘 Section 44AD – For Small Businesses

• Applicable to resident individuals, HUFs, and partnership firms (not LLPs).
• Business turnover/gross receipts should not exceed ₹3 crore (if cash receipts <5%, else ₹2 crore).
• Income presumed to be 8% of turnover (6% if received digitally).
• No need to maintain books or get audit done.
• Deduction under Sections 30-38 deemed included; no separate claim allowed.
• Not applicable for commission, brokerage, agency, or plying/hiring goods carriage.

📘 Section 44ADA – For Professionals

• Applicable to resident individuals or partnership firms (not LLPs).
• Profession notified under Section 44AA(1) like legal, medical, engineering, architectural, accountancy, etc.
• Gross receipts should not exceed ₹75 lakhs (if digital receipts >95%, else ₹50 lakhs).
• Income presumed at 50% of gross receipts.
• No need for audit or maintaining books of account if income declared as per 44ADA.

📘 Section 44AE – For Transporters

• Applicable to all assesses engaged in plying, hiring, or leasing goods carriages.
• Should not own more than 10 goods vehicles at any time during the year.
• Income presumed at ₹1,000 per ton per month for heavy vehicles (>12,000 kg) and ₹7,500 per month per vehicle for others.
• No audit required, and depreciation deemed included.

📊 Comparison Table

The table below gives a snapshot comparison among Sections 44AD, 44ADA, and 44AE.

Criteria	Section 44AD	Section 44ADA	Section 44AE	Applicability
Eligible Assessee	Resident Individual, HUF, Partnership Firm (non-LLP)	Resident Individual, Partnership Firm (non-LLP)	Any Assessee	Based on Business Type
Applicable For	Small Businesses	Specified Professionals	Goods Transporters	Business/Profession/Transport
Turnover/Gross Receipts Limit	₹3 crore	₹75 lakhs	Own <=10 vehicles	Monetary/Asset Based
Presumptive Income Rate	8% / 6%	50%	₹1,000/ton or ₹7,500/month	Fixed/Deemed
Books of Account	Not Required	Not Required	Not Required	Simplified Compliance
Audit	Not Required	Not Required	Not Required	No Burden

❓ Frequently Asked Questions (FAQs)

• Q1. Can I switch between 44AD and normal taxation every year?

A taxpayer opting for 44AD and declaring lower income than prescribed is not allowed to opt back into 44AD for the next 5 years.

• Q2. Can an LLP opt for 44AD or 44ADA?

No, LLPs are not eligible for presumptive taxation under Sections 44AD or 44ADA.

• Q3. Do I have to pay advance tax under these sections?

Yes, but you can pay the entire advance tax by 15th March of the financial year.

• Q4. Can I declare higher income than prescribed?

Yes, taxpayers can declare higher income if they wish under any of these sections.

Conclusion

Sections 44AD, 44ADA, and 44AE are powerful tools that simplify tax for small taxpayers. Whether you’re a business owner, professional, or transporter, knowing which scheme fits you best can slash compliance work and streamline filing.