Can a software developer pay tax on 6% under section 58?
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Short answer
Usually not. The 6% rate is in section 58(2), Table row 1 of the Income-tax Act, 2025 (the old 44AD), and row 1 is closed to anyone who carries on a "specified profession".1 Information technology is named as a specified profession in section 62(4), so a freelance developer typically falls under row 3 (the old 44ADA), where deemed profit is 50% of gross receipts up to ₹50 lakh, or ₹75 lakh if cash receipts are within 5%.12
Developers often hear that "44AD lets you pay tax on 6% of turnover". For income earned from 1 April 2026 (tax year 2026-27), both presumptive schemes sit in the Table to section 58(2) of the Income-tax Act, 2025: row 1 is the old 44AD and row 3 is the old 44ADA.1 Which one you can use is decided by what you do, not by which rate you prefer.
Why is row 1 closed to most developers?
Row 1 is available only to an "eligible assessee", which section 58(11)(a) defines as a resident individual, Hindu undivided family or firm other than a limited liability partnership (LLP) that, among other conditions, "does not carry on specified profession as defined in section 62(4)".1 Section 62(4) defines a specified profession as legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology or company secretary, plus any profession the Central Board of Direct Taxes notifies.2
A freelancer building web apps for a US startup, maintaining a Shopify store for a UK brand or doing DevOps for a German client is carrying on information technology work in most cases.2 That excludes row 1.
What does row 3 give a developer instead?
Row 3 covers a specified profession carried on by a resident individual or non-LLP firm.1
| Feature | Row 3 (old 44ADA) |
|---|---|
| Receipts limit | ₹50 lakh, or ₹75 lakh if cash receipts are within 5% |
| Deemed profit | 50% of gross receipts, or actual profit if higher |
| Lock-in | None |
| Declaring below 50% | Books and audit under section 58(3) if total income exceeds the exemption limit |
The figures above are from section 58.1 Foreign client payments by wire or platform payout are not cash, so most developers get the ₹75 lakh ceiling.1 The worked tax examples are in the section 44ADA guide.
How big is the difference?
On ₹40 lakh of receipts, row 1 would deem ₹2,40,000 as profit at 6%, while row 3 deems ₹20,00,000 at 50%.1 That gap is why the department looks closely at developers who file under row 1. If the classification is rejected, the income is recomputed and interest can follow.
When might row 1 be arguable?
Row 1 might be arguable for an activity that is genuinely not information technology work, for example a developer who also runs an unrelated trading business. Even then, the professional income stays outside row 1.1 Compare the two schemes in 44AD vs 44ADA and confirm your position with a chartered accountant (CA) before filing.
How did we verify this?
We checked this page against the sources below on 28 October 2026. Read our methodology or report an error.
Frequently asked questions
What if I run a SaaS product rather than doing client projects?+
Selling subscriptions to a product can look more like a business than a profession, but information technology is still listed in section 62(4). Whether row 1 is open depends on the facts, so take advice before choosing it.12
Can a developer declare less than 50% if expenses are high?+
Yes, but under section 58(3) declaring lower profit with total income above the basic exemption limit means keeping books and getting a tax audit.1
Is there a lock-in on row 3?+
No. The five-year consequence in section 58(7) applies only to row 1.1
Does a private limited company qualify for either row?+
No. Row 1 is for a resident individual, Hindu undivided family or non-LLP firm; row 3 for a resident individual or non-LLP firm.1
This page is general information for Indian service exporters, not tax or legal advice. Rules change and outcomes depend on your facts, so confirm with a chartered accountant before acting.
Keep reading
What is the difference between 44AD and 44ADA for Indian freelancers?
44AD vs 44ADA, now rows 1 and 3 of section 58 of the Income-tax Act, 2025: who qualifies, 6% vs 50%, limits, lock-in and which suits freelancers and agencies.
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