Let me talk to you—not as a tax consultant or finance guy—but as someone who’s sat exactly where you’re sitting right now.
Running your small business, watching every rupee.
Trying to file tax returns without losing your sanity.
Worrying whether to hire a full-time accountant or stick with your overworked freelancer.
I’ve been through the chaos—ledgers that never balanced, CAs that charged more than I earned in a week, and GST nights that gave me more anxiety than college results. And then, somewhere in a forgotten forum, I read the words:
“Presumptive Taxation under Section 44AD.”
It sounded like a shortcut.
It turned out to be a lifeline.
This blog is for you—if you’re a proprietor, small shop owner, service freelancer, or early-stage startup trying to simplify things and stay honest. Let’s go deep—together.
What is Section 44AD—In Your Language?
It’s the Income Tax Department telling small businesses:
“Look, we know you don’t have time for P&L statements and depreciation tables. Just tell us your total turnover, and we’ll assume a fixed profit.”
Here’s the deal:
- 8% of turnover if you receive payments in cash
- 6% of turnover if you get 95% digitally (UPI, bank, wallets)
- No audit, no detailed books, no quarterly advance tax hassle
That’s it. Your compliance burden just shrunk—by 80%.
✅ Who Can Use It?
| Eligible | Not Eligible |
| Resident Individuals, HUFs, Partnership Firms (non-LLPs) | LLPs, Companies |
| Businesses with turnover ≤ ₹3 crore (if 95%+ digital) | Those earning through commission, brokerage, hiring or transport |
| Traders, shopkeepers, freelancers, local manufacturers | Professionals (they use Section 44ADA instead) |
Update (Finance Act 2023): If you receive 95%+ of your turnover via digital means, your eligibility threshold increases to ₹3 crore (earlier ₹2 crore).
[Source: ClearTax, Budget 2023]
Why It’s a Game-Changer – Real Stats You’ll Feel
Save Time & Headache
No ledger maintenance, no auditor appointments.
Stat: ClearTax reports that 80% of eligible MSMEs using 44AD file faster, with ₹15,000–₹25,000/year in compliance savings.
Save Tax – Literally
Let’s say your turnover is ₹1 crore:
- If 95% digital → income presumed = ₹6 lakh
- If cash-based → income = ₹8 lakh
- Tax saved: ₹40,000–₹60,000 (even before applying your slab)
Ritu, a boutique owner from Jaipur, switched to full UPI in FY24 and claimed 44AD at 6%. She saved ₹12,480 in tax that year, and more importantly—stopped overpaying her CA.
No Audit or Books
No need to maintain formal P&L or balance sheets.
Raj, a Kirana shop owner with ₹80 lakh turnover, got rid of his auditor and used a simple Excel tracker + UPI sales summary to file his return—saving ₹18,000 in audit fees.
The Catch? Let’s Be Real
Not everything’s rosy. Here’s the fine print no one tells you:
| Rule | What It Means for You |
| 5-Year Lock-In Rule | If you opt out of 44AD in any year, you can’t use it again for next 5 years—and audit becomes compulsory. |
| GST Is Still Separate | Even if you’re under 44AD, you must still file GSTR-1, 3B, etc., if your business is GST-registered. |
| Only for Businesses | Freelancers in “professional” categories (e.g., designers, consultants) use Section 44ADA instead. |
| Income Fixed—Even if You Earn Less | Even if your net profit is 3%, you still pay tax as if you earned 6% or 8%. |
So it’s not always the best route—but in 80% of early-stage businesses I consult at TrueTal, this is a blessing in disguise.
Simple Tools to Track Your Turnover & Stay 44AD-Ready
| Tool | Use |
| Zoho Books (Free) | Auto-invoice & GST-ready reporting |
| Razorpay / BharatPe | Helps keep receipts digital & under 5% cash |
| ClearTax 44AD Estimator | Easy calculation of presumptive income |
| TrueTal Tracker Sheet | Our custom Google Sheet to track turnover + payment mode % |
Pro Tip: If you’re earning near ₹2.5–2.9 crore, shift your clients to UPI or bank. That one move may unlock ₹3 crore limit and save you an audit.
DIY, Freelancer, or Firm – What Should You Choose?
| You Are | Best Fit |
| Freelancer/retailer under ₹75 lakh | DIY + TrueTal quarterly review |
| ₹75L to ₹2.5 Cr, mostly digital | Outsource to freelancer accountant |
| Near ₹3 Cr with mixed modes | Hire firm like TrueTal for compliance + audit advice |
I’ve seen businesses try to “wing it” and get hit with notices for under-reporting or misfiling. Use the simplicity—but don’t fly blind.
From My Journey to Yours
I didn’t start TrueTal just to file returns.
I built it because I know what it feels like to have no idea what you’re doing at tax time—and still want to do it right.
Section 44AD doesn’t just simplify tax.
It protects your peace of mind.
And peace, for a small business owner, is more valuable than profit.
So here’s what I want you to do:
- Check your turnover
- Tally your digital %
- Run the 6% vs 8% calculation
- Message me if you’re unsure
From my spreadsheet-stressed days to now helping hundreds of clients—this one section has helped more than anything else.
Let me help you make it work for you.
Warmly,
Mahesh G
Founder – TrueTal.in
From chaos to clarity, one small business at a time.
