What is Section 44ADA?
Section 44ADA of the Income-tax Act, 1961 offered a simplified way for resident professionals to compute tax. Instead of keeping full books and claiming every expense, an eligible professional could declare 50 percent of gross receipts as income (or more, if actual profit was higher) and pay tax on that. It was meant for individuals and partnership firms (not LLPs) in professions such as legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration and other notified professions, within a receipts limit: ₹50 lakh, or ₹75 lakh where cash receipts stayed within 5 percent of the total.
The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026, and its provisions carry new section numbers. A similar presumptive scheme continues, but confirm the current section, limits and eligibility with your CA rather than relying on the old reference.
Why it matters for exporters
Many Indian freelancers who earn in dollars, euros or pounds use presumptive taxation because it keeps compliance light. Whether your work counts as a "specified profession" is the key question; some kinds of software or design work may qualify while others may not, and that is a call for your CA.
Presumptive taxation affects only how your income is computed. It does not change your foreign exchange obligations. If you are a proprietor or firm invoicing foreign clients, the EDF rules apply to your invoices regardless of how you compute tax. Individuals providing services under personal contracts may be outside the reporting requirement, based on RBI's 7 October 2026 statements, but FAQs are still awaited, so check with your bank.
Example
Dev Malhotra, a freelance engineering consultant in Pune, receives ₹38,00,000 from clients in the US and UK during the year, all by bank transfer. Using the presumptive scheme, he declares ₹19,00,000 as income. He works as an individual, so until RBI's FAQs arrive he asks his bank whether he needs to file an EDF for his invoices.
Common confusion
Presumptive taxation is an income-tax choice and has nothing to do with GST registration, LUT or the EDF. Read presumptive taxation for freelancers earning in dollars. This is general information, not tax advice.