You work as an independent professional, consultant, or freelancer? You will then appreciate what the Income Tax Act’s Sec 44ADA provides. Without complicated books or audits, this is a basic and wise approach to file your income tax. Should your income be less than ₹75 lakh, this section can save time, effort, even money.
Let’s dissect it.
The Sec 44ADA of Income Tax Act is what?
Part of the presumptive taxation system, Sec 44ADA of Income Tax Act is especially intended for individual professionals. It allows you to pay tax just on that, declaring a set percentage of your income as profit, so saving detailed accounting from unnecessary use.
Section 44ADA’s users include who?
Residents, Hindu Undivided Families (HUFs), or partnership companies (excluding LLPs) employed in the following fields will find this section relevant:
- Legal (arguments, legal consultants)
- Medical (including doctors, dentists, etc.)
- architectural or technical assistance
- Taxes or accounting consulting
- Technical advising
- Residential designers
- Various informed experts
Use this scheme if you work in these fields and your overall gross receipts come up to ₹75 lakh.
How Does It Go?
- Of your overall receipts, you mark half as profit.
- Considered as expenses, the remaining 50% is not necessary to show actual bills for.
- You pay taxes just on the stated fifty percent income.
For instance, if you freelance software consultant and make ₹60 lakh a year:
- Treated as taxable income is 50% (₹30 lakh).
- Paying taxes on ₹30 lakh per slab
Ad advantages of applying Section 44ADA
- Not necessary any book of accounts.
- None of an audit is required.
- simple tax computation
- Save money, time, and effort.
Things to Recall
- You have to be Indian resident.
- Your gross receipts overall should be less than ₹75 lakh.
- You have to keep books and get an audit if your income is less than 50% and you wish to declare smaller profit.
Filing taxes using Sec 44ADA
- file using ITR-4 form.
- Additionally eligible for deductions under Section 80C, 80D, etc.
- Advance tax is applicable should total tax liability be more than ₹10,000.
Typical Mistakes to Avoid
- Using 44ADA in a Field Not covered by Your Profession
- Not remembering to report other income (such as rent or interest).
- claiming additional costs (not covered by this clause)
- Ignoring advance tax if necessary
Independent professionals who wish to keep their tax filing simple and neat will find perfect fit in Sec 44ADA of Income Tax Act. It’s meant to help India’s expanding freelancing and self-employed population. If you qualify, go ahead and use this easy tax route; concentrate more on your work than on documentation.
