Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak e-Term

Protect Your family’s financial future with Kotak e-Term. Know more

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family. Know more

Kotak Guaranteed Savings Plan

A plan that offers long term savings and insurance in one premium. Know more

Kotak e-Invest

Insurance and investment in one plan with Kotak e-Invest. Know more

Kotak Lifetime Income Plan

Retirement years are the golden years of life. Know more


Get a Call

Enter your contact details below and we will get in touch with you at the earliest.

  • Select your Query

Thank you

Our representative will get in touch with you at the earliest.

Section 44AD of Income Tax Act for AY 2021-22

Section 44AD is a presumptive taxation scheme introduced by Income Tax Law to ease the tax burden on small taxpayers or assesses. Read more about section 44AD of the Income Tax act for the AY 2021-22.

  • Nov 05, 2018

To provide a reprieve to smaller taxpayers, the Income Tax Act includes sections 44AD, 44ADA, and 44AE. These sections eliminate such assessments from the cumbersome task of maintaining an audit limit for AY 2021-22.

Known as the Presumptive Taxation Scheme (PTS), these sections provide special provisions to compute business profits on a presumptive basis.

Meaning of Section 44 AD

According to the Income Tax Act, business owners must retain regular accounts. In addition, they need to audit their books of accounts. However, when assessing adopt the PTS under section 44 of the income tax act, they may declare income at prescribed rates. It relieves them from the cumbersome task of maintaining and auditing accounts.

The presumptive taxation scheme is designed for small taxpayers involved in any venture except those defined in this section. The following taxpayers may opt for this scheme:

  • Resident partnership firms, which exclude limited liability partnerships (LLP)
  • Resident individuals
  • Resident Hindu Undivided Family (HUF)

The scheme is not available for non-resident taxpayers. Additionally, any assesses who claim income tax deductions under sections 10A, 10AA, 10B, and 10BA or under sections 80HH and 80RRB are not eligible for this scheme.

Eligibility to get the advantages of presumptive taxation strategy under Section 44 AD

The following categories are eligible:

  • Hindu Undivided Families (HUFs)
  • Resident individuals
  • Partnership firms, barring Limited Liability Partnerships (LLP)

In addition to the above:

  • The annual gross turnover should not be more than ₹2 crores in the previous year for individuals and firms.
  • Individuals or firms are eligible if they have not claimed a tax deduction under Section 10A, 10B, 10AA, and 10BA during the assessment year.
  • Individuals and firms are eligible if they have not claimed tax deductions under Section 80RRB and 80HH.

Section 44 AD – Conditions

Here are some conditions under section 44 of income tax act

  • Firms or individuals hiring, and plying goods carriages are not eligible.
  • Firms or individuals running a brokerage or commission-based business are not eligible.
  • Individuals running an agency are not eligible.
  • Taxpayers earning from a profession under Section 44AA (1) are not eligible.

Businesses excluded from Section 44 AD

Small business owners engaged in ventures excluding the following may claim relief under this section:

  • An individual who earns brokerage or commission
  • Businesses leased, plying, or hired goods carriages as specified under section 44E.
  • A person engaged in any agency
  • Insurance agents earning income through commissions cannot adopt the PTS
  • Any business with an annual income exceeding ₹20 crores is not eligible for availing of the benefits under the PTS

Section 44 ADA limits

Here are some limitations of section 44 of income tax act

  • Total gross earnings from a profession should be less than ₹50 lakhs for a given financial year.
  • If the income from a profession is less than 50% of the gross receipts, the taxpayer must maintain a book of accounts.
  • If the taxpayer’s total income is more than the basic exemption limit, the taxpayer is required to maintain a book of accounts.

Tax feature of Section 44 AD strategy

Here are the features of this strategy:

  • 8% of the annual gross turnover of a business in the previous is considered to be the presumptive income for the current assessment year.
  • The annual turnover should be less than ₹2 crores.
  • Individuals and firms can use the presumptive income as their net income for the current year.
  • Taxpayers cannot claim a deduction under Section 38 or 30 if they choose Section 44 AD.

Computation of business income

The usual way to compute business income is as follows:

Taxable business income = Gross turnover from business operations – business-related expenses

The business income is computed at 8% of the total gross turnover during the year. However, to encourage small business owners to digitalize their operations, section 44 - 2018 – 19 is modified; the income is calculated at a rate of 6% of the total gross turnover of the business during the year. The gross turnover includes revenues through account payee checks, bank drafts, or the electronic clearing system.

Therefore, when a business adopts the presumptive taxation scheme, total taxable income is calculated at 6% or 8% based on the gross turnover. However, a business owner may voluntarily disclose a higher income if required.

Under the standard guidelines of the Income Tax Act, the total taxable income from business operations is calculated after deducting the allowable expenses and disallowing expenses that are not by the act.

However, when assesses adopts this scheme, there is no provision for allowing or disallowing any business-related expenses. The taxable income is capped at the prescribed rate of the total gross turnover. Moreover, when this scheme is adopted, there is no additional provision for depreciation. The Written Down Value (WDV) of an asset is calculated according to depreciation provisions under section 32.

Advance tax payment provision

All assesses who adopt the PTS must pay the entire advance tax liability on or before March 15 of the previous year. If such advance tax is not paid, interest per section 234C is levied.

Opting in and out of Section 44 ADA

Taxpayers can opt for the presumptive tax scheme in any assessment year. Taxpayers can also opt-out as per their choice. However, once opted out, taxpayers cannot choose the scheme for the next 5 years.

Assessees that opt for this scheme must follow it for at least five years. This scheme becomes unavailable to them for the next five years if this provision is not met. An ideal section 44A example could be to assume that an individual adopts the scheme for the assessment year 2017–18. They continue adopting the presumptive taxation scheme for the next two years, i.e., 2018 -19 and 2019–20. However, they did not adopt this scheme the following year, 2020–21. Therefore, they will be unable to claim the benefits under this section for the next five years, i.e., for assessment years 2021–22 until 2025 –26. During this period, they will have to maintain their accounts and get these audit limit for ay 2021-22 as per the provision of the Income Tax Act.

Other relevant points regarding Section 44 AD

Here are some crucial points to keep in mind:

  • In the case of more than one businesses, tax is calculated on the total turnover of all the businesses combined.
  • In the case of income from business and profession, the income from business can be considered to avail the benefits of Section 44 AD. However, the income from the profession is taxed as ordinary income under prevailing income tax slabs.
  • Taxpayers who opt for the benefits under Section 44 AD need to use ITR Form 4 to file their income tax returns.
  • Taxpayers can claim tax benefits under Chapter VI-1 along with the benefits of the presumptive tax scheme under Section 44 AD.

Declaring lower income or higher income under the Presumptive Taxation Scheme

Declaring lower income:

  • If a taxpayer’s total turnover exceeds the declared presumptive income or 8% of the previous year’s turnover, the taxpayer must maintain a book of accounts under Section 44 AA.
  • The book of accounts should be audited per section 44 AB limit for AY 2021-22. Declaring higher income.
  • A taxpayer can declare a higher income than the presumptive income or 8% of the previous year’s turnover.
  • No book of accounts has to be maintained in this case.

Every firm is required to keep track of its profit and loss statements, official books of accounts, and other records used to determine its tax obligations. However, they are now provided with an exemption from reviewing the book of accounts and are required to pay a rate set by the slabs under the Presumptive Taxation Scheme, thanks to the establishment of Section 44 AD of the Income Tax Act.

Section 44AD is a presumptive taxation scheme under which income is estimated on the basis of 8% of sales (or 6% in the case of digital receipts and payments), and the taxpayer is given a break if the account books are not kept up to date.

Download Brochure


  • Increasing Life Cover*
  • Guaranteed^ Maturity Benefits
  • Enhanced Protection Through Riders
  • Tax Benefits
  • Dual Benefits: Guaranteed^Maturity + Death benefits

Ref. No. KLI/22-23/E-BB/999


Download Brochure


  • Enhanced Protection Through Riders
  • Life Cover
  • Tax Savings
  • Multiple Premium Payment Terms
  • Guaranteed @ Loyalty Addion
  • Accrued Guaranteed @ Additions

Ref. No. KLI/22-23/E-BB/490


- A Consumer Education Initiative series by Kotak Life

Similar Articles

What is TDS (Tax Collected at Source)? A comprehensive guide

हाउस रेंट अलाउंस क्या है और इसके छूट की गणना कैसे की जाती है?

What is TDS Refund Process?

Types of Income Tax Return (ITR) Forms

Income Tax Deductions & Exemptions under Sections 80C, 80D & 80DDB for FY 2021-22 & 2022-23

Tax Saving for Self Employed in India

How to Save Income Tax with Insurance

Why is Form 16 Important?

How to Boost Your Savings with Guaranteed Results

How to create a savings plan and make good investment choices

Is PF Withdrawal Taxable for NRI?

Why PAN Card is Essential for Income Tax Filing?

Interest Imposed Under Sections 234A, 234B and 234C

Financial Benefits and Government Schemes Every Woman in India Should Know

What is Section 80C Deduction?

What is the Difference Direct Tax and Indirect Tax

Everything You Need to Know About Tax Benefits of National Pension Scheme (NPS)

What is HRA (House Rent Allowance) and How is HRA Exemption Calculated?

How Much Money This Budget 2019 Can Help You Save

Basics of Guaranteed Savings Plan

How to Check Income Tax Returns Status Onine?

Income Tax Effects on Salary Deductions in the Union Budget 2023

What is the Percentage of Tax Deducted at Source (TDS)?

Penalty For Late Filing TDS Return

Tax Saving Guide for 2019-20

Received an Income Tax Notice? Your Guide to Understanding Intimations under Section 143 (1)

3 Tips to Buy Guaranteed Savings Plan

Do Beneficiaries Pay Taxes on Life Insurance?

How Do Assured Savings Plans Work and Why You Should Consider One?

How To Save Tax Using Life Insurance?

How Should I Allocate A Monthly Savings Plan For Long-Term Benefits?

Difference between Section 80C, 80CCC, 80CCD & 80D

Home Investment Plan to Buy Dream Home

9 Unusual Investments you Didn't Know for Saving Taxes in India

How to Download Form 16?

Income Tax Exemption for Physically Handicapped Dependent

Why Tax Planning Should Be an All-year Round Activity

Guide for Tax Calculation on your Salary

Personal Finance - Meaning, Importance, and Tips for Personal Finance

Easy ways to make personal savings plans

What is ITR & How to File Income Tax Return?

Should one prefer a guaranteed savings plan over monthly income schemes?

What Investment Options Come with Tax Incentives?

प्रधानमंत्री सुरक्षा बीमा योजना

Problems People Face with Tax Returns after a Job Change

आयकर स्लैब 2021-2022

Income Tax Deductions Under Section 80C

What is Form 16A?

Tax-Free Income in India

How to e file ITR on Income Tax Government Portal

Difference Between Guaranteed Savings Plan and Guaranteed Income Plan

How to Pay Advance Tax Online in India

What is the TDS Rate on Salary?

What is TDS Slab?

A Complete Guide for Filing ITR 3 Form

Investing Lump Sum Amount

How to File TDS Return?

How can I get Form 16B from traces?

आयकर रिटर्न (आईटीआर) फॉर्म के प्रकार

Presumptive Taxation for Business and Profession

How to Get Form 16?

Section 10 (10d) of Income Tax Act, 1961 on Payouts of Life Insurance Policy

Difference Between Guaranteed and Assured Returns

How to File Form 10E for Tax Relief on Salary Arrears?

Highlights of the Union Budget 2023-24

What is the Difference between Assessment Year (AY) and Financial Year (FY)?

What To Do If Your TDS Is Not Deposited With The Government?

ITR 2 Form – Complete Guide

Form 16, Form 16A, and Form 16B?

List of Important Income Tax FAQs

What is the difference between TDS and TCS?

Invest in Tax-Free Bonds: Understanding the Benefits and Who can Invest?

What is Rule 132 of Income Tax? How Does it Affect You?

What is Form 16B?

ITR-6: Guide to filing ITR-6 Form online

E-Filing of Income Tax Returns in India

Saving Plans to Give Children a Debt-free College Education

Tax Planning Tips for a Newly Married Couple

TDS Due Dates of FY 2022-23 For Return Filing

Guaranteed Return Plans-Why is it a must for you?

Tax-Savings Investments and Options in India

A Guide to Life Insurance Policy’s Tax Benefits and Taxability

What is the Maximum Maturity Benefit in Assured Savings Plans?

What is indirect tax and its types?

What is capital gains tax, and how it works?

TDS rules on the sale of jointly owned property

52 Weeks Savings Plan: Daily Savings Plans for a Better Tomorrow

Tax Saving Options other than Section 80C

What is Form 26AS - All You Need To Know

How can NRIs prevent double taxation in India?

Top 8 Tax-Saving Methods in India- Budget Planning

Plan your Daughter's Wedding With Best Monthly Savings Plan

Tax Structure in India

Union Budget 2023 and Tax Exemptions on Life Insurance Premium Over ₹5 Lakhs

What is Section 10D of the Income Tax Act?

What is an Endowment Plan?

What is Section 80C Deduction Limit?

Best Savings plan for the middle class in India

Income Tax Benefits for Doctors

9 Income Tax Myths That Could Cost You Money while Filing returns

When Should TDS be Deducted and Who is Liable to Deduct it?

Income Tax Filing Using Multiple Form 16

Section 16 of the Income Tax Act (ITA), 1961

How Inflation Affects Savings and Investment?

ITR 1: Sahaj Form

Why January Is an Important Month for Saving Tax?

LTC Cash Voucher Scheme October 2020 – Everything You Need to Know

How to File Form 16 for Salaried Employees?

How to create wealth through a savings plan?

सुकन्या समृद्धि योजना (SSY) के कर लाभ क्या हैं?

How To Invest In Guaranteed Return Plans For Higher Returns And Financial Security?

Tax Rate Chart for FY 2022-2023: What is TDS Slab?

What is Tax Evasion, and What are the Penalties for Tax Evasion in India?

Tips to plan your savings in 2022

Understanding Tax Exemptions in ULIP (Old and New)

How to Save Tax on Salary Arrears?

Saving Income tax in 2017 - 18

Key Changes of the Union Budget 2023 You Must Know

Challan 280 - How to Use Challan 280 to Pay Income Tax

Section 80C Deductions as per Income Tax Act, 1961

What is TDS Exemption Limit?

धारा 80डी आयकर अधिनियम, 1961

Income Tax Deductions for Disabled Persons Under Section 80U

Insurance and Endowment: Everything You Need to Know!

भारत में महिलाओं के लिए सरकारी योजना

What Is Advance Tax and How Is It Calculated?

What is a savings plan?

Tax Planning and Tax Benefits of Life Insurance

Tax Saving Tips: Best Ways to Save Income Tax for 2021

Who Should Invest In Savings Plan

A Comprehensive Guide to Understand the ITR 7 Form

Income Tax Exemption for Disabled

Impact of GST on Life Insurance in India

How To Save Tax Better with 80C

How to File Income Tax Return - Everything You Need to Know

Income Tax Filing For NRI in India

Tax Benefits for Startups in India

Maximize Your Savings: Tax Tips for Salaries Above ₹20 Lakhs

Section 80D - Medical and Health Insurance Tax Benefits Under Section 80D

Investment Proofs You Need Submit To Lower TDS Cut From Your Salary

How much gold can you keep at home? Limits and income tax rules explained

How to File ITR Online

Income Tax Deduction Under Section 80CCC In India

Tax Exemption and Scope of Coverage

Should you prefer a Guaranteed Savings plan over monthly income schemes?

What is Section 195 of the Income Tax Act? TDS on Non-Residents of India

Save Income Tax by 31st March: Here Is a Checklist

All about TDS on Salary under Section 192 – Kotak Life

प्रत्यक्ष कर और अप्रत्यक्ष कर में क्या अंतर है?

Importance of Savings Plan You Need to Know

8 Things to Help You Select a Savings Investment plan

Money Saving Tips for Single Women

How to File Income Tax Return without Form 16

Tax Benefit of Investing in Term Plan

How to File Income Tax Return for First Time Tax Payers

Section 80G of the Income Tax Act

Income Tax Slabs and Rates in India for FY 2021-22/AY 2022-23

Tax Season is Coming- Know How to Save Tax

Tax Benefits of ULIP Plans Available for NRIs

What is Tax Deduction at Source (TDS)?

What is Section 80CCC of the Income Tax Act 1961

Post Office Savings Scheme - All You Need to Know

Personal Finance - How to Deal with Emergencies When Preparing Finances

Tax Deductions You MUST Know

5 Popular Tax-Saving Schemes in India

Difference Between Gross Income & Total Income in Calculating Income Tax

sections Under Section 80C of the Income Tax Act, 1961

What is the Last ITR Filing Date and Penalty for Late Filing of ITR?

धारा 80सी आयकर अधिनियम, 1961

What is better - Guaranteed Savings Plan or Fixed Deposit?

All You Need To Know About Assured Savings Plan

Budget 2019: Impact on the Common Man in India

स्रोत पर कर कटौती (टीडीएस) क्या है?

All you need to know About Tax on Inheritance

Understand ITR4 Form: How to Fill, Structure & Determine Your Eligibility

Union Budget 2023: Impact on Life Insurance

12 Tax Changes in Budget 2022 that May Impact Your Personal Financial Planning

इनकम टैक्स रिटर्न कैसे फाइल करें?

Complete Savings Plan for Low Income Earners

How to View 26AS and Download Form 26AS Online?

What is Section 80C - Explained in Detail

Are Financial Planning and Tax Planning the Same Thing?

All You Need to Know About Section 80C

Tax Saving Options for Salaried Employees

What are Direct Taxes? How to Avoid being Overtaxed?

How to file Form 16 online?

How to Check Income Tax Refund Status Online in India

Things to Do After Filing Income Tax Returns

What is the Difference between Form 16 and Form 16A?

Section 80E: Tax Exemption on Interest on Education Loan

What is ITR 5 Form and How to File ITR 5?

How to Claim a Tax Refund?

How to View 26AS and Download Form 26AS Online

Pradhan Mantri Suraksha Bima Yojana

Financial Planning and Best investment options for Housewives

What is EEE in income tax? 5 tax-free investment options to become crorepat

How to Calculate returns on an assured savings plan?

How to E-Verify ITR: A Step-by-Step Guide to Electronically Verify your Income Tax Return

What is Salary Protection Insurance and Why You Need It

How to Check Income Tax Refund Status Online in India

What are Deferred Savings Plans?

Income Tax Calculator: How Life Insurance Policies are Taxed? Explained

How to save tax for salaried person?

What are the Different Types of Taxes in India?

Have You Considered Term Insurance a Part of Your Tax Planning?

All about TDS Payment Online & Due Dates

Types of Riders in Insurance Policy