Filing your Income Tax Return (ITR) can feel complicated, but for small business owners, shopkeepers, traders, and freelancers, the Indian government offers a simplified process under Section 44AD – the Presumptive Taxation Scheme. This blog provides a comprehensive, easy-to-understand step-by-step guide for filing ITR using Section 44AD for the Assessment Year 2025-26.

What is Section 44AD Presumptive Taxation?

Section 44AD is a special scheme for small businesses, allowing them to declare income on a presumptive basis—i.e., a fixed percentage of their gross receipts or turnover. The biggest advantage is no need to maintain detailed books of account or get audits done if you opt for this scheme, making compliance easy and stress-free for small business owners.

• Digital Receipts (Bank Transfers, UPI, etc.): Show 6% profit of total digital receipts.

• Cash Receipts: Show 8% profit of total cash receipts.

• Eligibility Turnover: Total turnover should be less than ₹2 crore.

Who Can File ITR Under Section 44AD?

You can opt for Section 44AD if you are:

• An individual, HUF (Hindu Undivided Family), or partnership firm (not LLPs).

• Running a small business, retail shop, trading, or service provider business.

• Your turnover is less than ₹2 crore in the previous financial year.

Not Eligible:

• Companies and LLPs (Limited Liability Partnerships).

• Professionals earning income from commission, brokerage, or agency business.

Essential Documents Required

Prepare these documents before you start filing:

• PAN Card

• Aadhaar Card

• Bank Statement for the financial year

• Summary of Sales/Purchases

• Details of cash and digital receipts

• Login details for the Income Tax portal

• Form 26AS and AIS (Annual Information Statement), if needed

Which ITR Form to Use?

• Use ITR-4 (Sugam) for filing returns under Section 44AD.

• This form is applicable if your income is under Section 44AD (business), 44ADA (professionals), or 44AE (transport businesses).

Online ITR-4 (Sugam) Filing Process (AY 2025-26)

Follow these simple steps for a hassle-free ITR filing:

1. Login: Go to the Income Tax portal and log in with your credentials.

2. Select Filing Option:

   • Choose ‘e-File’ > ‘Income Tax Returns’ > ‘File Income Tax Return’.

   • Select the Assessment Year 2025-26.

   • Choose ‘Online’ mode and select ITR-4.

3. Enter Details:

   • Fill in Personal and Business details.

   • Declare your turnover, distinguishing digital and cash receipts.

     • For digital receipts: 6% of amount.

     • For cash receipts: 8% of amount.

4. Confirmation:

   • Verify profit calculated under Section 44AD.

   • Confirm all tax computations and liabilities (if taxable income exceeds exemption limits).

5. e-Verify Return:

   • Complete the e-verification process using Aadhaar OTP, net banking, or EVC method.

6. Submission:

   • Submit your return and keep acknowledgment safe.

Example Calculation of Taxable Income

Suppose your total turnover is ₹15 lakh:

• Digital receipts: ₹12 lakh → Profit @ 6% = ₹72,000

• Cash receipts: ₹3 lakh → Profit @ 8% = ₹24,000

• Total taxable income = ₹72,000 + ₹24,000 = ₹96,000

If taxable income is below ₹2.5 lakh, you owe no income tax. If above, normal tax slabs apply.

Common Mistakes to Avoid

• Using the wrong ITR form (always select ITR-4 for Section 44AD).

• Failing to e-verify the return.

• Declaring turnover exceeding ₹2 crore under Section 44AD.

• Opting for Section 44AD if you’re ineligible (like in the case of companies or LLPs).

• Not maintaining basic turnover proof (bank statements, invoices) – for future reference in case of notice.

Compliance Reminders & Tax Tips

• Maintain simple turnover proof (bank documents, invoices).

• Once opted, you should follow Section 44AD for 5 consecutive years.

• No additional deductions for expenses allowed as presumptive profit already considers basic expenses.

Why Use Section 44AD?

• Easy filing: Little documentation, fewer compliance hassles.

• No mandatory audit or books of account.

• Perfect for small businesses, traders, freelancers, and shopkeepers wanting to file quickly and focus on their business.

If you need help, consult a CA or ask queries in the comment section below. Remember, timely and correct filing saves you from future penalties and scrutiny.

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