ITR Filing Options for Professionals: Section 44ADA, Presumptive Scheme, and Tax Liability Explained

With the ITR filing season around the corner, many professionals—particularly advocates—are weighing their options under Section 44ADA and the presumptive taxation scheme. A recent Reddit query summed it up bluntly: Can an advocate earning ₹20 lakh pay zero tax by using ITR-4 and Section 44ADA under the new regime?

ITR 3 vs. ITR 4: Which Applies to Professionals?

• ITR 3: Chosen when you declare actual income after deducting allowable expenses. Example: Suppose an advocate earns ₹20 lakh with minimal expenses. The taxable income will be close to ₹20 lakh, leading to a tax liability of around ₹3 lakh under the new regime.

• ITR 4: Applicable to eligible professionals opting for the presumptive taxation scheme under Section 44ADA. Here, only 50% of gross receipts are deemed as income, regardless of actual expenses. Example: ₹20 lakh receipts → ₹10 lakh taxable income.

How Section 44ADA Works in Practice

• Available to certain professionals (advocates, doctors, CAs, etc.) with gross receipts up to ₹50 lakh.
• Income is automatically considered as 50% of receipts, no matter what your real expenses are.
• Detailed bookkeeping isn’t required if you opt for this scheme.

As Abhishek Soni, CEO of Tax2Win, puts it:

“Under Section 44ADA, professionals with gross receipts of ₹20 lakh must declare income equal to either 50% of their gross receipts or their actual income, whichever is higher. Those who select this scheme are not obligated to maintain comprehensive accounts for expenses if their annual gross receipts are under ₹50 lakh.”

The Zero-Tax Myth

For FY 2024-25 (AY 2025-26):

• Tax on ₹10 lakh under the new regime: Standard deduction of ₹75,000 applies, and slab rates kick in at 10%. That means tax is payable—not zero.
• The zero-tax relief under the new regime currently applies only if post-deduction income is below ₹7 lakh.
• The proposal to extend zero-tax up to ₹12 lakh will apply only from FY 2025-26 returns, not this year’s filing.

Legality and Compliance

Choosing Section 44ADA and filing ITR-4 is entirely legitimate—as long as:

• Your gross receipts are below ₹50 lakh, and
• You are engaged in a specified profession.

Key Takeaways for Professionals

• Check your eligibility for Section 44ADA before choosing ITR-4.
• Don’t assume the new regime wipes out tax on ₹20 lakh receipts for FY 2024-25—it doesn’t.
• Always refer to the applicable year’s rules before planning your tax strategy.
• If in doubt, consult a CA to balance compliance and tax efficiency.