Presumptive Taxation for Small Businesses and Professionals in Maharashtra
Reviewed by the Commoner Law Editorial Team. Sourced from Indian central (Union) law — Constitution of India, central Acts of Parliament, and Supreme Court decisions. State-level information reflects each state's own Acts and High Court rulings. Written in plain language for general understanding — this is educational content, not legal advice. Our editorial standards
What is this right?
Small businesses and professionals in India can compute income under simplified presumptive taxation schemes, avoiding the need for detailed accounts.
- Section 44AD (Small businesses): Businesses (not professionals or certain specified businesses) with annual turnover up to ₹3 crore (₹2 crore for those not accepting digital payments) can declare income at a flat 8% of gross receipts (6% if receipts are through banking channels). This is the presumed income — no need to maintain detailed accounts or get an audit.
- Section 44ADA (Professionals): Professionals (doctors, lawyers, chartered accountants, engineers, architects, etc.) with gross receipts up to ₹75 lakh can declare income at a flat 50% of gross receipts — no detailed accounts or audit required.
- Section 44AE (Goods carriage operators): Flat income of ₹7,500 per month per vehicle for goods carriage operators owning up to 10 vehicles.
- Opting out of 44AD and declaring lower income requires maintaining books and getting an audit (s. 44AB) for the next 5 years.
- Advance tax is payable in a single instalment by 15 March if using the presumptive scheme.
When does it apply?
- You are a small trader, shopkeeper, or contractor with turnover below ₹3 crore.
- You are a doctor, lawyer, or engineer earning professional fees below ₹75 lakh per year.
- You want to avoid the cost and complexity of maintaining detailed books of accounts.
What to Do If You Are a Small Business or Professional Who Qualifies for Presumptive Taxation in India
- Select ITR-4 (Sugam) when filing your return — this form is specifically designed for taxpayers under s. 44AD, 44ADA, and 44AE.
- Pay the entire advance tax (based on presumed income) in a single instalment by 15 March to avoid interest under s. 234B/234C.
- Maintain basic bank statements and invoices even under the presumptive scheme — the department can ask for these in a scrutiny assessment.
What should you NOT do?
- Do not opt out of the presumptive scheme in any one of the 5 years without being prepared to maintain full accounts for the entire 5-year block — one opt-out locks you into full accounts for 5 years.
- Do not use the presumptive scheme if your actual profit margin is significantly higher than the prescribed rate — you still pay tax on the presumed income even if actual profit is lower, but declaring higher actual income may be beneficial.
- Do not exceed the turnover limits (₹3 crore for 44AD, ₹75 lakh for 44ADA) without switching to the regular scheme with mandatory audit — exceeding limits without audit attracts penalties under s. 271B.
How Maharashtra differs from central law
Presumptive taxation under Sections 44AD, 44ADA, and 44AE of the Income Tax Act is a central scheme and applies uniformly across India. However, Maharashtra's large base of small businesses and professionals makes these provisions particularly relevant in the state.
For small business owners in Maharashtra choosing the presumptive tax scheme (Section 44AD for businesses with turnover up to Rs. 3 crore, or Section 44ADA for professionals with gross receipts up to Rs. 75 lakh with digital payments), the state-level obligation to note is Maharashtra Professional Tax. Even if you opt for presumptive income tax at the central level, you must separately register for and pay Maharashtra professional tax if your annual professional tax liability exceeds Rs. 2,500. The professional tax is a deductible expense when computing taxable income under the presumptive scheme.
Additional Steps in Maharashtra
File ITR-4 (Sugam) for presumptive taxation on the income tax portal at incometax.gov.in. For professional tax registration, apply at your municipal corporation office or the Maharashtra GST department's portal. Chartered accountants in Maharashtra can assist with both central presumptive tax and state professional tax compliance. The Institute of Chartered Accountants of India (ICAI) Mumbai branch: 022-33671400.
Relevant Law: Income Tax Act, 1961, Sections 44AD, 44ADA, 44AE; Maharashtra Professional Tax Act, 1975
Common Questions
When does presumptive taxation for small businesses and professionals apply?
You are a small trader, shopkeeper, or contractor with turnover below ₹3 crore.You are a doctor, lawyer, or engineer earning professional fees below ₹75 lakh per year.You want to avoid the cost and complexity of maintaining detailed books of accounts.
What should I do if I want to use the presumptive taxation scheme under section 44AD or 44ADA in India?
Select ITR-4 (Sugam) when filing your return — this form is specifically designed for taxpayers under s. 44AD, 44ADA, and 44AE.Pay the entire advance tax (based on presumed income) in a single instalment by 15 March to avoid interest under s. 234B/234C.Maintain basic bank statements and invoices even under the presumptive scheme — the department can ask for these in a scrutiny assessment.
What mistakes should I avoid with presumptive taxation for small businesses and professionals?
Do not opt out of the presumptive scheme in any one of the 5 years without being prepared to maintain full accounts for the entire 5-year block — one opt-out locks you into full accounts for 5 years.Do not use the presumptive scheme if your actual profit margin is significantly higher than the prescribed rate — you still pay tax on the presumed income even if actual profit is lower, but declaring higher actual income may be beneficial.Do not exceed the turnover limits (₹3 crore for 44AD, ₹75 lakh for 44ADA) without switching to the regular scheme with mandatory audit — exceeding limits without...
Legal Resources
We may earn a commission if you use these services — at no extra cost to you. This supports our mission to make legal information free for everyone.