Section 44AD vs Regular Taxation: Which Saves More?

Section 44AD lets small businesses declare income at a flat 8% of turnover (6% for digital receipts) without maintaining detailed books. It's simple — but not always optimal.

Section 44AD at a glance

• Eligible: resident individuals, HUFs and partnership firms (not LLPs/companies)
• Turnover limit: ₹3 crore (if cash receipts ≤ 5%, else ₹2 Cr)
• Deemed profit: 8% of turnover (6% on digital receipts)
• No detailed books required; no separate 80C/depreciation claim against 44AD income
• Must continue 44AD for 5 consecutive years once opted

When 44AD wins

• Real profit margin is above the 8%/6% presumptive rate
• You don't want audit/bookkeeping overhead
• You receive most payments digitally (6% rate is hard to beat)

When regular taxation wins

• Your actual profit is well below 8% (e.g. low-margin trading)
• You have heavy fixed costs, salaries, rent or depreciation to claim
• You want to carry forward business losses (not allowed under 44AD)

Quick example

Turnover ₹50L, all digital. Under 44AD, deemed profit = ₹3L. Tax (New Regime, no other income) = nil (within rebate). Under regular books with actual profit of ₹6L, tax = ₹15,000 + cess. 44AD saves ₹15,600 here.

Need help deciding? Our ITR Basic plan (₹499) includes 44AD filing, and ITR Pro handles full regular-book cases.