Explainer: Difference between Section 44AD and Section 44ADA of I-T Act

The confusion usually arises because both sections are about presumptive taxation, but their applicability is different

Many taxpayers get confused between Section 44AD and Section 44ADA of the Income Tax Act. The names look similar, both deal with presumptive taxation, and both are meant to reduce compliance. But the two are meant for very different groups of people.

 

Section 44AD is designed for small businesses such as shopkeepers, traders, small contractors, or other business owners. It can be used by individuals, Hindu Undivided Families (HUFs), and partnership firms, though not by limited liability partnerships (LLPs). To be eligible, the business turnover should not exceed ₹2 crore in a financial year. Under this scheme, the taxpayer can