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₹24 Lakhs Income, ₹0 Tax? Here’s How Freelancers Can Legally Pay Less Tax Under Section 44ADA

Sounds too good to be true? It’s not — if you understand the power of India’s presumptive taxation scheme.

If you’re a freelancer, consultant, IT professional, designer, content creator, or coach, you’ve probably asked:

“Do I really need to keep books of accounts and get audits done for my income?”

The answer: Not always.
Thanks to Sections 44AD and 44ADA of the Income Tax Act, there’s a legally approved way to declare a percentage of your income as profit — and still be fully compliant.

Here’s how it works (and what to be careful about ????).

What Is Presumptive Taxation for Freelancers?

Instead of maintaining detailed accounts, you can declare a fixed percentage of your income as profit and pay tax only on that.
This is a huge relief for service professionals and small businesses.

There are two relevant sections:

• Section 44AD – For small businesses and non-professional freelancers
• Section 44ADA – For professionals like consultants, developers, designers, lawyers, doctors, etc.

Conditions You Must Fulfill

???? Section 44AD

• Eligible Turnover: Up to ₹2 crore (₹3 crore if >95% of income is digital)
• Minimum Taxable Income:
• 6% of turnover (digital receipts)
• 8% of turnover (cash receipts)

???? Section 44ADA

• Eligible Turnover: Up to ₹50 lakhs (₹75 lakhs if >95% is digital)
• Minimum Taxable Income: 50% of gross receipts

You don’t need to maintain books of accounts or get an audit done if you declare the minimum (or more).

Here’s the Catch

The law says:

“Declare at least the minimum % of profit… or MORE. But not less.”

If you declare less than 50% (in 44ADA) or 6%/8% (in 44AD), then you must get your books audited under Section 44AB.
That means more paperwork and higher compliance cost.

But Wait — How Will the Tax Department Know?

This is where most freelancers go wrong.

You may think:

“How can the IT department know how much I actually made or spent?”

Here’s how ⬇️

???? The Income Tax Department Knows:

• Your investments (mutual funds, shares, real estate, crypto)
• Property purchases (TDS is deducted above ₹50 lakhs)
• Your spending (foreign travel, luxury purchases)
• Digital transactions (UPI, credit card, bank statements)

All of this is visible in your AIS (Annual Information Statement).

So if you declare ₹12 lakhs income but your investments total ₹25 lakhs — the system will flag you for scrutiny.

What’s in Your AIS (Annual Information Statement)?

Here’s just a partial list of what the Income Tax Department sees:

• Salary & allowances
• Interest & dividend income
• Rent received or paid
• High-value investments
• Property purchases/sales
• Foreign income & crypto assets
• TDS & advance tax
• Capital gains from shares, mutual funds
• GST turnover
• Loan repayments

In short: Your entire financial profile is visible.

Smart Freelancer Tax Tip

If your actual profit is more than 50%, there’s no harm in declaring more.
It builds your credibility, helps with home loans, visa applications, and startup investments later.

Presumptive tax is a tool to save time, not to evade tax. Use it wisely.

Not Sure What to Declare? Get Professional Help.

At Alliance Tax Experts, we’ve helped 1,290+ freelancers, consultants, and creative professionals file accurate, compliant ITRs under Section 44ADA and 44AD.

Avoid income tax notices.
Plan your investments.
Declare smartly.
Sleep peacefully.

Call us now at 9769201316
www.alltaxfin.com

“Don’t just save tax. Build trust, peace of mind, and financial freedom.”

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