Quick answer: If you freelance in a listed profession, you can pay tax on just 50% of what you earn. The scheme everyone called 44ADA is now Section 58 of the Income-tax Act, 2025. The limit is ₹50 lakh of receipts, or ₹75 lakh if 95% of your receipts come through bank transfers. You file ITR-4 and skip books and audit.
What 44ADA was — and what Section 58 keeps
Section 44ADA was the old law’s presumptive scheme for professionals. It let you declare half your receipts as profit and skip the rest of the paperwork. That scheme still exists. It just has a new number.
For all income earned from 1 April 2026 onward, the Income-tax Act, 2025 applies. Old section numbers no longer exist for that income. So:
- Old 44ADA → new Section 58
- Old 44AD (for businesses, 6%/8% rule) → new Section 57
- Old 194J (TDS on professional fees) → new Section 393
- Old 87A (rebate) → new Section 156
The rules inside Section 58 are the same ones you knew under 44ADA. 50% of gross receipts is deemed income. No books of account. No tax audit while you stay in the scheme. Filing stays on ITR-4 (Sugam).
If a client, accountant, or article mentions “44ADA” for FY 2026-27 income, they mean Section 58. Same scheme, new number.
Who can use it: the specified-professions list
Only resident individuals and partnership firms can use this scheme. LLPs and companies cannot. You must be in one of the specified professions:
- Legal (advocates, lawyers)
- Medical (doctors, surgeons, dentists)
- Engineering (consultants across branches)
- Architectural
- Accountancy (CAs, CMAs)
- Technical consultancy (IT consultants, software developers, freelance engineers)
- Interior decoration
- Other notified professions — film artists, journalists, writers, sports persons, and more
Most freelancers in IT, design, content writing, and consulting fit under “technical consultancy” or the notified-professions list. A designer on Fiverr, a developer on Upwork, and a freelance content writer all qualify if they stay under the receipts limit.
Who does not qualify:
- Pure traders and commission agents — they cannot use this scheme at all
- Anyone whose professional receipts cross the limit
- Businesses whose work falls outside the specified professions — they look at Section 57 (old 44AD) instead
One common doubt: foreign clients count too. Receipts from Upwork or Fiverr clients abroad are professional receipts for this purpose. You stay a tax resident, the scheme applies, and you claim foreign tax credit separately if tax was withheld abroad.
The ₹75 lakh question: when the higher limit applies
The standard limit is ₹50 lakh of gross receipts in a year. But the law raises it to ₹75 lakh on one condition: cash receipts must be 5% or less of total receipts. In plain words, 95% or more must come through banking channels — bank transfers, UPI, card payments, cheques.
Example: a consultant earns ₹68 lakh in the year. ₹3 lakh came in cash, ₹65 lakh through bank transfers. Cash is about 4.4% of the total. The higher limit applies, and the scheme stays open.
Example: another consultant earns ₹52 lakh. ₹8 lakh came in cash. That is about 15% cash. The ₹75 lakh limit is closed. The ₹50 lakh limit is also crossed. The scheme cannot be used this year — it is books, ITR-3, and the normal route.
If your cash receipts are zero or tiny, you effectively get the ₹75 lakh ceiling. Most online freelancers do.
44ADA vs actual expenses: which wins
The scheme trades simplicity for a fixed 50% deduction. If your real costs are below 50% of receipts, the scheme saves tax and paperwork. If your real costs are above 50%, the normal route wins.
Here is the math under the new regime for FY 2026-27 (tax year 2026-27), including the 4% health and education cess:
| Your receipts | Deemed profit (50%) | Approx tax | Effective rate on receipts |
|---|---|---|---|
| ₹12 lakh | ₹6 lakh | ₹0 (rebate) | 0% |
| ₹20 lakh | ₹10 lakh | ₹41,600 | ~2.1% |
| ₹40 lakh | ₹20 lakh | ₹2,08,000 | ~5.2% |
| ₹60 lakh | ₹30 lakh | ₹4,99,200 | ~8.3% |
| ₹75 lakh | ₹37.5 lakh | ₹7,33,200 | ~9.8% |
A few things jump out. First, receipts up to about ₹24 lakh can mean zero tax — half is deemed profit, and the rebate (old 87A, now section 156) wipes out tax up to ₹12 lakh of income. Second, the effective rate on your actual earnings stays in single digits all the way up to the limit.
Now compare with actual expenses. Say you earned ₹40 lakh and spent ₹6 lakh on a laptop, software, co-working rent, and internet. Real profit is ₹34 lakh. Under the scheme, deemed profit is ₹20 lakh. The scheme wins by ₹14 lakh of taxable income.
But say you ran a small studio: ₹40 lakh receipts, ₹26 lakh in salaries and rent. Real profit is ₹14 lakh. Under the scheme, deemed profit is ₹20 lakh. The normal route wins — you would declare ₹14 lakh on ITR-3 with books.
Rule of thumb: if your genuine costs are under 50% of receipts, the scheme wins. If they run above 50%, do the normal computation. Run the numbers both ways every year.
Filing, advance tax, and TDS: the compliance part
Which form. Under the scheme, file ITR-4 (Sugam). It is the short form built for presumptive filers. If you opt out and claim real expenses, you file ITR-3 with books of account.
Advance tax. Professionals in the scheme pay advance tax in a single instalment: 100% of the estimated tax by 15 March of the financial year. No quarterly schedule. If your total tax for the year stays below ₹10,000 after TDS, you owe no advance tax at all.
TDS by clients. Indian clients deduct 10% TDS on professional fees above ₹50,000 in a year (the old 194J, now section 393). This TDS is not your final tax — it is an advance payment. You claim credit for it in your return and get a refund if the deducted amount exceeds your actual liability. Foreign clients usually deduct nothing, but you still owe the Indian tax yourself. Always match your claimed TDS with Form 26AS and the Annual Information Statement before filing.
Salary plus freelancing. You can hold a job and freelance. The scheme applies to the freelance part. File one ITR-4 covering both heads — salary under its head, freelance receipts under the presumptive head.
Frequently asked questions
Who is eligible for 44ADA / Section 58?
Resident individuals and partnership firms in specified professions: legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, film artists, and other notified professions. Gross receipts must stay under ₹50 lakh, or ₹75 lakh if 95% or more comes through banking channels. LLPs, companies, traders, and commission agents are excluded.
Can I claim 80C deduction along with 44ADA?
Yes. The 50% deemed deduction covers only your professional expenses. Chapter VI-A deductions — old 80C, 80D, 80G (now sections 123, 126, 133 of the 2025 Act) — are still available on your total income. So a ₹20 lakh deemed profit with ₹1.5 lakh of 80C savings becomes ₹18.5 lakh of taxable income.
What if my actual expenses are more than 50% of my receipts?
Use the normal route that year: maintain books, claim real expenses, file ITR-3. If you declare less than 50% profit and your total income exceeds the basic exemption limit, you also need a tax audit. And there is a lock-in: declaring below the deemed rate means you lose the scheme for the next five years. Think before you opt out for a one-off high-cost year.
Can I use 44ADA if I also have a salary?
Yes. The scheme covers your freelance income; your salary stays under the salary head. One ITR-4 return handles both. Your employer’s TDS on salary and your clients’ TDS on fees both go into the same return.
Do I need to maintain books of account under the scheme?
No. The Act specifically exempts scheme users from the books requirement. Keep your invoices and bank statements anyway — you still need them if a question ever comes up, and good records make the yearly scheme-vs-actual comparison a five-minute job.
What happens if I opt out of the scheme after using it?
You move to books and ITR-3 for that year, get an audit where required, and cannot re-enter the scheme for five years. The bar exists to stop people from hopping between the easy route and the real-expenses route year to year. Plan the exit in advance, ideally with a CA.
Official sources
- Income-tax Act, 2025 — Section 58 (presumptive scheme for professionals): incometax.gov.in
- CBDT guidance on professional receipts and ITR-4: incometax.gov.in
- GST registration threshold for services (₹20 lakh) — relevant once receipts grow: cbic.gov.in
Reviewed by Asuthod Rathod, CA
Last updated: 13 October 2026
Disclaimer: This article explains tax rules in simple language for general information only. Tax laws change often and individual situations differ. For advice on your specific case, consult a qualified chartered accountant or check the official portals (incometax.gov.in, cbic.gov.in) before acting.
Editorial byline for eircicai freelancer tax and ITR filing guides — covering 44ADA presumptive tax, advance tax, and ITR filing. Content is reviewed by Asuthod Rathod, CA.
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