Your fees crossed the 44ADA limit. What changes?

You're a resident developer, consultant or other professional, and this year's receipts are heading past the line.

By Vipul Sharma, Founder. Reviewed by Preetesh Maloo, ICAI-registered Chartered AccountantLast reviewed 1 November 20264 min read

From tax year 2026-27 the old 44ADA is section 58 of the Income-tax Act, 2025. It taxes 50% of receipts while they stay within ₹50 lakh, or ₹75 lakh if cash is 5% or less. Cross that and profit comes from your books, and a tax audit is compulsory because receipts are above ₹50 lakh. Forming an LLP or a company doesn't bring the 50% scheme back. Only a resident individual, or a firm that isn't an LLP, can use it.

Confirm this with a practising CA before you act. The answer depends on the year and your documents.

Why this happens

You've filed on 50% of receipts for years. Now one big client takes you over the limit, and everyone online says to open an LLP or a company.

What changes once you cross

Run the checker first. Then read the steps in order.

Check you were in the scheme at all. Section 58 (formerly Section 44ADA) is only for a resident individual, or a partnership firm that isn't an LLP, in a specified profession under section 62(4). The list names legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, information technology and company secretary work, plus any profession the Board notifies. The department's FAQ says the same.
Check which ceiling is yours. It's ₹50 lakh of gross receipts. It rises to ₹75 lakh when cash is no more than 5% of receipts. A cheque or draft that isn't account-payee counts as cash. Bank transfers, including a foreign client's wire, don't.
Above the ceiling, the 50% figure is gone. Profit is receipts minus your actual expenses, from books you keep under section 62 (formerly 44AA).
With receipts above ₹50 lakh, a tax audit under section 63 (formerly 44AB) is compulsory. The CA reports on Form 26, which replaces Forms 3CA, 3CB and 3CD from tax year 2026-27. It's due one month before the return due date. For you, the return is due on 31 October, so the report is due by 30 September. It needs the CA's UDIN.
Advance tax changes too. The scheme let you pay it all by 15 March. Outside it, section 408 (formerly 211) asks for 15% by 15 June, 45% by 15 September, 75% by 15 December and the rest by 15 March. Plan the first instalment of the year you cross.
Still under the ceiling, but your real margin is below 50%? You can declare less, but section 58(3) then needs books and the section 63 audit if your income is above the amount that isn't taxed.
Income earned up to 31 March 2026 is still under the 1961 Act's Section 44ADA and Section 44AB. A CA checks that year on its own text.

Is section 58 still open to you?

Who is paid the fees?

Need help with this? Choosing a tax accountant and understanding fees

Related situations

Stay as you are, an LLP, or a company

None of the three gets section 58 back. An LLP is a firm under the Act, and section 58 excludes it. A company can't use it at all.

Stay as you are. You keep books, get the audit, and pay tax at your slab on real profit. Often the simplest move for one person.
LLP. The LLP is taxed as a firm. Your share of its profit isn't taxed again in your hands, under Schedule III, serial 2 of the 2025 Act (formerly section 10(2A)).
Private limited company. A domestic company can opt for 22% under section 200 (formerly 115BAA), before surcharge and cess. What you take out as salary or dividend is taxed again in your hands. Section 92 lists any dividend as income from other sources.

Which one leaves you more depends on your expenses, what you draw out and who else is in it. Depends. Talk to a CA, with your numbers.

Need help with this? Choosing a tax accountant and understanding fees

Related situations

Getting help

How we help

1
We check the ceiling
An ICAI-registered CA partner reads your receipts and cash and says whether section 58 still fits this year.
2
We run the three options
Stay, LLP or company, on your real expenses and drawings. No vehicle is picked from a blog post.
3
We do the books and the audit
Books for the year, the Form 26 audit report by 30 September, and the return by 31 October.

What to have ready

Documents you may need

Start with just your phone number. We'll explain which documents are needed on the call.

This year's invoices and bank statements
Any cash or non-account-payee cheque receipts
Last year's return and the advance tax you've paid
Your main expenses: rent, equipment, software, staff

Sources and references

Income-tax Act, 2025, sections 58, 62, 63, 263 and 408 (Gazette). https://egazette.gov.in/WriteReadData/2025/265620.pdf
Income-tax Act, 2025, as amended by the Finance Act, 2026. https://www.incometaxindia.gov.in/documents/d/guest/income_tax_act_2025_as_amended_by_fa_act_2026-pdf
Income Tax Department, FAQs on the presumptive taxation scheme. https://www.incometaxindia.gov.in/documents/d/guest/faqs-on-tax-on-presumptive-taxation-scheme
Income Tax Department, Form 26 FAQs. https://www.incometaxindia.gov.in/documents/d/guest/form-26-faqs

Common questions

No. The scheme is only for a resident. If your status changes during the year, settle residence first, because that decides the whole computation.

Not because of this limit. GST registration and an export LUT have their own tests. The freelancer GST and LUT page covers them.

Fees you earned yourself stay your receipts for that year. The company's start from its own contracts. Which side a pending invoice falls on Depends. Talk to a CA before you move clients across.

The exceptions that change the answer

Where the general rule stops applying to you

Every rule below has a carve-out, a cut-off date or a condition that flips the answer. These are the ones that decide real cases.

Tax audit threshold

Right now: Business: Rs 1 crore turnover, or Rs 10 crore where cash receipts AND cash payments are each 5% or less. Profession: Rs 50 lakh

Where it works differently

An NRI has Indian business or professional income: The same thresholds apply. Residence is irrelevant to s.44AB.; The test is turnover, not status.
The 5% cash test is applied: BOTH receipts and payments must be within 5%. Failing either drops the limit back to Rs 1 crore.; Both provisos must be satisfied.

Commonly got wrong

The audit limit is Rs 10 crore for all businesses. Only where both cash receipts and cash payments are 5% or less; otherwise Rs 1 crore.Rs 1 crore, rising to Rs 10 crore only if cash receipts and cash payments are each within 5% of the total.

Presumptive taxation for professionals

Right now: Rs 75 lakh where cash receipts are 5% or less, otherwise Rs 50 lakh; 50% deemed profit

Where it works differently

The professional is a non-resident: s.44ADA is not available. Like s.44AD, it is restricted to residents.; s.44ADA applies to an assessee being a resident in India carrying on a specified profession (Income Tax Department ITR-4 FAQ Q8/Q12; same resident bar as the section text).
Actual profit is below 50%: Books and an audit are required to declare the lower figure.; s.44ADA(4) read with s.44AB(d).

Commonly got wrong

Non-resident professionals can use Section 44ADA. s.44ADA, like s.44AD, is for a resident assessee only. An NRI professional cannot opt for it.Section 44AD and Section 44ADA are both resident-only. A non-resident professional cannot use the 44ADA presumptive scheme; once resident, 50% deemed profit up to Rs 75 lakh where cash receipts stay within 5%.

Related guides and tools

Weighing an LLP against a private limited company? For an NRI, the real gap isn't the paperwork Are the LUT and the bank advice the same paper?Does a freelancer have to file an export declaration?

Receipts past the 44ADA limit this year?

Send your receipts so far. An ICAI-registered CA partner will say whether the audit applies and what an LLP or company would change.

A practising Chartered Accountant handles your Indian tax work.

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