TaxFinancial Glossary
Presumptive Taxation
Definition
A simplified tax scheme under Sections 44AD, 44ADA, and 44AE where eligible businesses and professionals can declare income at a prescribed percentage of gross receipts without maintaining detailed books of accounts. For businesses (44AD): 8% of receipts (6% for digital receipts). For professionals (44ADA): 50% of receipts.
Why It Matters
Presumptive taxation dramatically simplifies compliance for small businesses and freelancers. A freelance developer earning Rs 30 lakh per year under 44ADA declares Rs 15 lakh as income, pays tax on that, and avoids the cost and complexity of maintaining full accounting books and getting them audited.