What is the difference between 44AD and 44ADA for Indian freelancers?

Indian freelancers often hear that they can "choose" between 44AD at 6% and 44ADA at 50%. In most cases the Act makes the choice for them, because the business scheme is shut to anyone carrying on a specified profession. From 1 April 2026 both schemes live in the Table to section 58(2) of the Income-tax Act, 2025: the old 44AD is row 1 and the old 44ADA is row 3.¹

This comparison uses the 2025 Act for tax year 2026-27 (income from 1 April 2026). For income earned up to 31 March 2026 the 1961 Act sections apply.⁴ For how row 3 works in detail, see the section 44ADA guide.

What is the difference between section 44AD and section 44ADA?

Section 44AD (now row 1 of section 58) is a presumptive scheme for businesses, and section 44ADA (now row 3) is a presumptive scheme for specified professions.¹ The two rows differ on who can use them, the limits, the deemed profit and the lock-in, as set out in sections 58, 62(4) and 408(2):¹²³

The row you use follows from what you do, so classification comes before rate.

Who can use section 44AD (row 1) and section 44ADA (row 3)?

Section 44ADA (row 3) is open only to a person carrying on a profession listed in section 62(4), and section 44AD (row 1) is open to other businesses that are not commission, brokerage or agency work.¹² The professions in section 62(4) are legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology and company secretary, plus any profession CBDT notifies.² Section 58(11)(a)(iii) says an eligible assessee for row 1 "does not carry on specified profession".¹

The table above is drawn from sections 58, 62(4) and 63.¹²³ See section 62 specified professions for how common services map.

How do you choose between section 44AD and section 44ADA?

You choose between section 44AD and section 44ADA by first fixing what your work is, then checking entity type, limits and costs.¹²

1. Classify the work: compare it with the professions listed in section 62(4).²
2. Check the entity: row 1 takes resident individuals, HUFs and non-LLP firms; row 3 takes resident individuals and non-LLP firms.¹
3. Check the receipts limit: ₹50 lakh for row 3 (₹75 lakh if cash is within 5%), ₹2 crore for row 1 (₹3 crore).¹
4. Check the exclusions: row 1 does not cover commission, brokerage or agency business.¹
5. Compare deemed and actual profit: if real expenses exceed what the scheme assumes, actual profit with books may give a lower figure.³
6. Confirm with a chartered accountant: settle the classification before you file.

A choice made only on the rate, without classifying the work first, is the one most likely to be reopened.

What limits, rates and deadlines apply to section 44AD and section 44ADA?

Section 44ADA (row 3) deems 50% of receipts as profit up to ₹50 lakh, and section 44AD (row 1) deems 6% of digital receipts as profit up to ₹2 crore.¹ The figures below come from sections 58, 63 and 408 of the Income-tax Act, 2025:¹³

Above these limits the scheme does not apply, and normal books-based profit takes over.

What happens if you get the 44AD or 44ADA choice wrong?

Getting the 44AD or 44ADA choice wrong can mean a recomputed profit, a five-year bar from row 1, or a mandatory audit.¹ The main consequences under section 58 are these:¹

• Crossing ₹75 lakh under row 3: the scheme does not apply at all, and section 63 requires a tax audit once professional receipts exceed ₹50 lakh.¹³ See tax audit for freelancers.
• Declaring below 50% under row 3: if your total income exceeds the basic exemption limit, section 58(3) requires books and an audit.¹
• Opting out of row 1: if you declare profit under row 1 and then, in any of the next five tax years, do not declare profit in line with the scheme, section 58(7) bars you from row 1 for the five tax years after that year.¹
• Books and audit after opting out: where section 58(7) applies and total income exceeds the exemption limit, section 58(8) requires books and an audit.¹
• Using row 1 for a profession: a designer or writer who adopts row 1 only because 6% is lower than 50%, when the department considers the work a profession or the income not a business, risks the computation being redone.¹

Settle the classification first, then the rate.

How is tax calculated under section 44AD and section 44ADA?

Tax under section 44AD and section 44ADA is calculated on a deemed profit: 6% of digital receipts under row 1, or 50% of gross receipts under row 3.¹ For example, take two freelancers each billing foreign clients ₹40,00,000 in tax year 2026-27, all by bank transfer:¹

The gap of ₹17,60,000 in deemed profit is large, which is exactly why the classification question attracts scrutiny.¹ Tax is then worked out on the deemed profit at the slab rates for the year.

Does the 44AD or 44ADA choice affect which ITR form you file?

Yes, for FY 2025-26 (assessment year 2026-27) the e-Filing portal lists ITR-4 for a resident individual, HUF or non-LLP firm declaring presumptive income under 44AD, 44ADA or 44AE with total income up to ₹50 lakh.⁵ The same page bars ITR-4 for anyone with income from a source outside India, assets outside India, or signing authority in a foreign account, so many exporters end up on ITR-3.⁵ Forms for tax year 2026-27 are covered in which ITR form freelancers file.

What are the common mistakes with section 44AD and section 44ADA?

The common mistakes with section 44AD and section 44ADA come from treating the two as a free choice.¹

• Picking the lower rate: a specified professional cannot use row 1, whatever the rate.¹
• Moving into an LLP: a freelancer who moves practice into an LLP loses row 3.¹ See sole proprietor vs LLP.
• Ignoring agency income: a marketing agency that earns commission on media buys, or a recruiter paid a placement fee as an agent, may be outside row 1 entirely.¹
• Forgetting the lock-in: leaving row 1 within five years triggers the section 58(7) bar.¹

The right row depends on what you actually do and how you contract. Confirm with a chartered accountant (CA) before you file.