India taxes individuals based on a system of income slabs. Different tax rates are assigned to different ranges of income.&nbsp;

Understanding tax slabs is crucial for several reasons.

As a person earns more, the tax liability also increases, creating a fair and progressive tax system in the country. To achieve this, the government regularly updates and announces changes to tax slabs in the Union Budget.

The income tax slabs differ between the old and new tax regimes. Let's explore the specific slab rates applicable to Individuals for FY 2022-23 (AY 2023-24) and FY 2023-24 (AY 2024-25).

Income Tax Slab Rates For FY 2023-24 (AY 2024-25)&nbsp;

Rates of the old tax regime slabs are categorized into three groups:

The new tax regime applies uniform tax rates to all individuals, eliminating the age-based distinctions in the old system. The new tax regime slabs 2023-24 are outlined below.

Applicability of Surcharge for FY 2023-24 (AY 2024-25)

The income tax <a href="https://incometaxindia.gov.in/charts%20%20tables/tax%20rates.htm">surcharge</a> is an extra fee imposed on top of the <a href="https://www.skydo.com/blog/how-to-file-taxes-under-44ada?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">regular income tax</a>. An additional tax is applied to individuals with higher income earnings in a specific financial year. Let’s look at the applicable surcharge rate under the Old and New tax regime.

However, 25% or 37% surcharge rates will not apply to income under the following sections.

Consequently, the highest surcharge rate on the tax payable for such incomes will be 15%.

Starting from the Assessment Year 2023-24, the maximum surcharge rate on tax payable for dividend income or capital gain specified in Section 112 will be capped at 15%.&nbsp;

A 4% Health and Education cess will be applied to all cases’ total income tax liability and surcharges.

Comparison of tax rates under the New tax regime and the Old tax regime for FY 2022-23 (AY 2023-24)

How do you calculate the income tax from the income tax slabs?

Let’s understand the calculation with an example.

Sanjana, aged 35, has a total taxable income of Rs. 8,50,000. She has opted for the old tax regime. Her income includes income from salary, interest and rental income. Deductions under section 80 have been reduced. Now, Sanjana wants to know her <a href="https://www.skydo.com/blog/gst-requirements-international-service-sales?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">tax liability</a> for FY 2022-23 (AY 2023-24).

*Sanjana, an individual taxpayer under the age of 60, enjoys an income exemption limit of up to Rs 2,50,000. Other taxpayers, i.e., senior and super senior citizens, have higher income tax exemption thresholds of Rs 3,00,000 and Rs 5,00,000, respectively.

Please be aware that the tax rates in the New Tax Regime are uniform for all categories of individuals, including regular individuals, senior citizens, and super senior citizens.&nbsp;

Individuals with a net taxable income of up to Rs 5 lakh qualify for a tax rebate under section 87A, resulting in zero tax liability in both the New and Old tax regimes. It's important to note that in Budget 2023, the rebate under the new regime has been extended, making income up to Rs 7 lakh tax-free from the FY 2023-24 onward.

Let's delve into effective strategies to maximize your investments while minimizing the associated tax burdens.

ELSS mutual funds provide a dual benefit of potential capital appreciation and tax savings under Section 80C of the Income Tax Act. Investing in ELSS reduces taxable income and offers a path for long-term wealth growth.

2. Explore tax-efficient investment avenues

Health insurance qualifies for tax benefits under Section 80D. You can claim tax benefits on premiums paid - up to Rs 20,000 for senior citizens and Rs 15,000 for others. For example, if you pay Rs 15,000 for your policy and Rs 20,000 for your senior citizen parent, you can claim a total tax benefit of Rs 35,000.&nbsp;

Maturity value is tax-free for sums received under critical illness insurance policies.

This strategy entails selling loss-making assets to realize the capital loss and using it to offset the gains earned by profit-making assets.

For instance, if you have a loss of Rs. 20,000 in Stock A and a gain of Rs. 30,000 from Stock B, you can sell Stock A during a market downturn to offset the gains. This way, you can reduce your taxable income. The saved amount can be reinvested for portfolio growth.

Ensure that tax loss harvesting aligns with your overall financial goals and plan by considering a discussion with a financial professional or tax advisor.

<a href="https://www.skydo.com/blog/how-can-the-right-chartered-accountant-help-your-tech-export-business?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Consult financial professionals or tax advisors</a> for effective tax planning and strategic advice. Their expertise can provide tailored insights aligned with your financial goals and ensure a well-informed approach to optimize your tax situation.

If you need help deciding what is right for you, we will connect you with our panel of Indian and US-based CA / CPAs. Feel free to reach out to us.

Q1. How is a taxpayer's income categorized?

Ans: A taxpayer's income falls into five categories outlined in Section 14 of the Income Tax Act. These include Income from salary, Profits from a business or profession, Income from House Property, Capital Gains, and Income from Other Sources.

Q2. Is it possible to avail of 80C deductions while choosing the new tax slabs 2023-24?

Ans: No, under the new tax regime, several deductions and exemptions, including those under section 80C, are not permitted. Opting for the new tax regime means foregoing the ability to claim deductions under section 80C.

Q3. What do "Previous Year" and "Assessment Year" mean?

Ans: We have two important terms in income tax provisions: (i) Previous Year and (ii) Assessment Year. Previous Year is when you earn income, typically from April 1st to March 31st. The year right after the Previous Year, from April 1st to March 31st, is called the 'Assessment Year.'

For example, the Previous Year is from April 1, 2023, to March 31, 2024 (FY 2023-24). The corresponding Assessment Year is from April 1, 2024, to March 31, 2025 (AY 2024-25).

Q4. What is the tax exemption limit for calculating income tax rebate under section 87A?

Ans: For FY 2023-24 (AY 2024-25), the rebate limit has been increased to Rs. 7,00,000 under the new tax regime. This means a resident individual with taxable income up to Rs 7,00,000 will receive Rs 25,000 or the amount of tax payable (whichever is lower) as tax relief. However, the old tax regime's threshold limit will remain the same, i.e., Rs 12,500 if taxable income is up to Rs 5,00,000.

Q5. How much is the standard deduction for FY 2023-24?

Ans: You can claim a standard deduction of ₹50,000 to the income taxable under the head ‘Salaries.’ The standard deduction is a tax benefit that can be claimed irrespective of the amount spent on Transport or Medical Allowance. It applies to individuals earning a salary or pension income.

Prepare for the upcoming year's tax season by understanding the tax slabs for 2023-24 and optimizing your tax savings. 

Tax Slabs in 2023-24: Plan Ahead for Next Year Tax Savings

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Rohit Khuranna

Sending money abroad can feel overwhelming, especially when understanding the compliance requirements. One key challenge Indian residents face is knowing when and how to file Form 15CA and Form 15CB, essential documents for making international payments to non-residents.

For example, if you run a software company in India and must pay USD 10,000 to a US-based UI/UX consultant, your bank will ask for Forms 15CA and 15CB before processing the payment.&nbsp;

Does that sound relatable? Don't worry. We're here to simplify it for you.

This blog will explain exactly what these forms are, why they matter, and how to file them easily. Let's get started!

Form 15CA is a declaration form required under Indian tax law, specifically <a href="https://www.incometax.gov.in/iec/foportal/help/all-topics/statutory-forms/popular-form/form15ca-faq#:~:text=As%20per%20Section%20195%2C%20every,be%20furnished%20in%20Form%2015CA.">Section 195 of the Income Tax Act</a>. It must be submitted by any person making payments to non-residents or foreign companies when such payments are deemed taxable in India. This form ensures that the correct amount of tax is deducted at source (TDS) before the payment (remittance) is made.

Form 15CA helps the Income Tax Department monitor foreign remittance details and their tax implications. It also assists non-residents in claiming credit for taxes deducted in India.&nbsp;

TDS rate declaration: The form requires disclosing the TDS rate applicable to the payment. This rate may be based on either <a href="https://www.incometax.gov.in/iec/foportal/help/all-topics/statutory-forms/popular-form/form15ca-faq#:~:text=As%20per%20Section%20195%2C%20every,be%20furnished%20in%20Form%2015CA.">Section 195 of the Income Tax Act</a> or any lower rate specified in a relevant DTAA.

Deductions: The payer must ensure that TDS is deducted at the source before paying, reflecting compliance with Indian tax obligations.

Form 15CB is a certificate from a Chartered Accountant (CA) required before filing Part C of Form 15CA. This certificate ensures compliance with the Double Taxation Avoidance Agreement and Income Tax Act for accurate tax deductions on payments. When making taxable payments above ₹5 lakhs to non-residents, you must first obtain this CA certificate and then use it to file Part C of Form 15CA.

Quick note: A DTAA is an agreement between two countries that helps determine the tax rates and obligations when making cross-border payments. For example, when paying a US-based consultant, the India-US DTAA helps decide which tax rate applies to your payment and how much TDS needs to be deducted before sending the money abroad.

TDS rate certification: In Form 15CB, the CA certifies the TDS rate applied to the payment. The rate could be determined as follows:

Deductions overview: The CA also confirms that all necessary deductions have been made according to legal requirements before remittance.

Let's break down Form no. 15CA into simple, digestible parts. Think of it as a document with four versions (A, B, C, and D), each for specific situations.

Part A: For taxable payments up to ₹5 lakhs

Use this version when you've got special permission from the tax officer (Assessing Officer) under <a href="https://www.incometax.gov.in/iec/foportal/help/all-topics/statutory-forms/popular-form/form15ca-faq">Section 195(2), 195(3), or 197</a> to:

Think of it as a pre-approved tax discount. When filing, you'll need to show the official permission letter.

Details required: Payer (remitter) and recipient (remittee) information and the AO's order details.

This is for bigger payments. You'll need to use this when:

Important: You'll need your CA to provide Form 15CB first before filing this part. This extra step helps verify your tax calculations for larger amounts.

Use this when your payment isn't taxable in India. For example:

Even though these payments might be exempt, you must declare them through Part D of Form 15CA.

💡Quick Tip: When you're paying non-resident service providers (like international consultants, developers, or designers):

Remember: These forms are for sending money abroad, not for receiving international payments.

Form 15CA is not required in the following situations:&nbsp;

Form 15CB is not required in the following situations:&nbsp;

Existing AO certificate: If a certificate has been obtained from the Assessing Officer under Sections 195(2), 195(3), or Section 197, indicating that TDS does not apply or can be reduced, then Form 15CB is not required.&nbsp;

As per&nbsp;<a href="https://incometaxindia.gov.in/Rules/Income-Tax%20Rules/103120000000007406.htm">Rule 37BB</a>, the following payments do not require Form 15 CA CB:

What Details are Required to File Form 15 CA CB?

The details required to file form 15CA are as follows:&nbsp;

The details required to file form 15CB are as follows:&nbsp;

Note: These supporting documents help your CA verify the applicable tax rates and prepare Form 15CB, but they're not directly submitted with the form.

How to file Form 15 CA and CB Online?&nbsp;

The steps to file Form 15CA online are as follows:&nbsp;

Step 1: Access the e-filing portal. Visit the <a href="https://www.incometax.gov.in/iec/foportal/">Income Tax forms page in the e-filing portal</a> and log in using your credentials (PAN, user ID, and password).

Step 2: Navigate to form selection. Go to e-File &gt; Income Tax Forms &gt; File Income Tax Forms, and select Form 15CA from the list.

Step 3: Choose the appropriate part of Form 15CA. Once at the instructions page, select the relevant part based on your situation: Part A for such remittances not exceeding ₹5 lakh, Part B if you have obtained a certificate from the Assessing Officer under Sections 195(2), 195(3), or 197, Part C for remittances exceeding 5 lakh rupees that are chargeable to tax (requires prior submission of Form 15CB), or Part D for remittances not chargeable to tax.

Step 4: Fill in the required details. In the selected part of Form 15CA, enter all necessary information as prompted, including details of both sender and receiver, nature of payment, and remittance amount.

Step 5: Verification and submission. Complete any required verification sections and submit Form 15CA online. A confirmation pop-up will appear upon successful submission, and you should receive an acknowledgement at your registered email address.

Step 6: Accessing submitted forms. After submission, you can view your submitted Form 15CA under the "Worklist" tab by selecting "For Your Information."

The steps to file Form 15CB online are as follows:&nbsp;

Step1: Preparation by chartered accountant (CA)&nbsp;

The CA must be registered on the Income Tax e-filing portal and have a valid Digital Signature Certificate (DSC). You must provide your CA with all necessary documentation to pay a non-resident.

The CA prepares Form 15CB, certifying that the payment complies with Indian tax laws and any applicable Double Taxation Avoidance Agreements (DTAAs).

Step 3: Log into the e-filing portal&nbsp;

The CA must log in using their credentials to visit the Income Tax e-filing portal.

Step 4: Access Form 15CB. After logging in, navigate to e-File &gt; Income Tax Forms &gt; File Income Tax Forms, and select Form 15CB from the list.

Step 5: Submission process Choose "Online" as the submission mode, enter the PAN of both the taxpayer and the CA, upload the prepared XML file generated from the downloaded utility, upload the DSC file generated using the DSC Management Utility, and click on the Submit button. You can also use the search box for any assistance.&nbsp;

Confirmation: Upon successful submission, a confirmation message and acknowledgment number (or transaction ID) will appear. The CA can view the uploaded Form 15CB under their dashboard. Keep the acknowledgement number for your future reference.&nbsp;

Receive International Payments Seamlessly with Skydo&nbsp;

Making international payments from India requires proper tax compliance through 15CA and 15CB documentation. Getting these right ensures smooth cross-border transactions and helps avoid regulatory issues.&nbsp;

Brands like Skydo simplify this process by providing instant FIRA documentation and GST-compliant invoicing for hassle-free global business payments.

Learn<a href="https://www.skydo.com/"> more about Skydo!</a>&nbsp;

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Form 15 CA CB

The Liberalised Remittance Scheme (LRS), introduced by the Reserve Bank of India (RBI) in 2004, transformed the way Indians send money abroad. Before LRS, transferring funds to support a student studying abroad or helping a relative was a cumbersome process filled with complex rules and lengthy procedures. With LRS, sending money abroad has become simpler and more accessible, especially for purposes like education, travel, and investments.

In this blog, we’ll explore everything about LRS, including its limits, permissible uses, tax implications, and how it simplifies outward remittance for Indian residents.

What is Liberalised Remittance Scheme (LRS)?&nbsp;

The Liberalised Remittance Scheme is a straightforward way for Indian residents to send money abroad. It allows you to transfer USD 250,000 each financial year without any hassles.&nbsp;

LRS is a part of the <a href="https://enforcementdirectorate.gov.in/fema">Foreign Exchange Management Act (FEMA)</a> passed in 1999. The FEMA regulations set the guidelines for foreign exchange management, in other words, how money flows in and out of India. In the case of LRS, it oversees how Indians remit money outside India.&nbsp;

LRS is open to all resident individuals in India, including minors. If a minor is making a remittance, their legal guardian needs to sign the declaration form to authorize it.

You can use LRS for a variety of purposes:

You can use LRS for capital and current account transactions within the overall limit of USD 250,000. For example, you can use LRS to pay USD 10,000 as education fees abroad and invest USD 30,000 in foreign stocks. Both are permitted transactions and do not breach the prescribed limit.

Here are three quick highlights about LRS that you should know:

Indian residents including minors can send money abroad under LRS. The sender must have a valid PAN card, a bank account in India and a passport. For minors sending money abroad, their legal guardian needs to sign the declaration form to authorize it.

However, note that LRS is not available for a corporate entity, partnership firm, HUF (Hindu Undivided Family), etc.&nbsp;

Which Transactions are Permissible Under LRS?

Here is the list of permissible current account transactions and capital account transactions under LRS:

Which Transactions are Prohibited Under LRS?

While the Liberalised Remittance Scheme (LRS) offers flexibility for sending money abroad, there are strict rules about what you cannot use it for. Here's a breakdown:

What are the RBI Guidelines for Outward Remittance?

In addition to what is permitted and prohibited under LRS, you must be mindful of the RBI guidelines for outward remittances. According to the RBI guidelines, outward remittance can be done via demand draft or opening an overseas bank account.&nbsp;

If you’re planning to do the latter, here are the steps you must follow:

Pick one branch of the AD bank to handle all your remittances under LRS for better tracking and compliance. You can check out the <a href="https://www.skydo.com/blog/compliance-guideline-for-inward-remittance">RBI guidelines for inward remittance right here.</a>

If you’re investing money overseas through LRS, then your profits from investments are taxable if the holding period:

Short-term (less than 2 years): According to the regular<a href="https://www.skydo.com/blog/tax-slabs-2023-24"> income tax slab</a> rates

If your remittance amount is more than INR 700,000, then you’re liable to pay a 5%<a href="https://www.skydo.com/blog/tcs-on-foreign-remittance"> TCS</a> (Tax Collected at Source). You can claim this TCS as a refund while filing Income Tax Returns (ITR) using Form 26 AS.

As LRS makes outward remittances a lot simpler, here are some of its biggest benefits:

This is probably the biggest benefit of LRS. With more than<a href="https://onestep.global/overview-of-the-indian-study-abroad-market/#"> 1 million</a> Indian students expected to travel abroad for overseas education in 2024, LRS will be their go-to channel to receive money from their families. This way they can take care of their tuition fees and living expenses without affecting their education.

LRS is convenient for those who travel overseas frequently. They could use it to pay for tickets, hotels, and other travel-related expenses

An investor could take advantage of LRS to diversify their investments abroad. They can invest in shares, mutual funds, bonds, and real estate to maximize their returns

LRS is the ideal avenue if you want to give gifts to your family members or relatives staying overseas. Likewise, you can also make donations to charitable organizations based outside of India

Medical treatments overseas are expensive and often come unannounced. But with the help of LRS, you can transfer money and pay for the bills in the medical institute. It’s also a payment option for those patients who have travelled abroad for specialized treatment

You can also send money to your relatives via LRS to help them meet their living expenses. This is highly useful when they’re going through financial difficulties.&nbsp;

What Happens if You Need to Remit More Than USD 250,000?

If you need to remit beyond the USD 250,000 limit under LRS, there are specific exceptions:

Always ensure you meet the necessary conditions or secure RBI approval for larger remittances.

Receive Foreign Payments in India seamlessly with Skydo

The Liberalised Remittance Scheme (LRS) streamlines outward remittances for resident Indians. As LRS falls under FEMA and operates within the RBI guidelines, it is one of the safest and most trustworthy solutions for sending money abroad. This is a huge relief for students studying overseas as their families can transfer money without hassles. The same applies to medical treatments in foreign lands or to help relatives meet their daily expenses.

Like LRS streamlines outward remittance, Skydo simplifies receiving international payments in India. It offers virtual accounts that allow you to receive money from international clients as if they’re making a local transfer. So when your clients make payments to your virtual accounts, they don’t have to incur the high costs like SWIFT fees associated with international payments.

In addition to that, your payments are converted to local currency based on live exchange rates so that you get the best value. Whether you’re an exporter or a freelancer, Skydo is the right partner to grow your business overseas.&nbsp;

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In business transactions involving cross-border payments, selecting the appropriate purpose code is critical to comply with RBI and FEMA regulations. The S1099 purpose code applies to miscellaneous business services that do not fall under any specific predefined categories. This guide explains the role of the S1099 code, when to use it, and how it ensures smooth inward remittance processing under RBI guidelines.

The S1099 purpose code is designated for miscellaneous business services that do not fit into any other purpose code categories. It is a catch-all code for services that involve other business-related activities, ensuring these payments are properly classified under RBI guidelines.

When businesses engage in activities not covered by specific purpose codes for exports, advertising, consultancy, or software services, the S1099 code becomes applicable. To understand more about the role of purpose codes in international transactions, refer to what purpose codes are for a deeper insight.

Importance of S1099 Purpose Code in Inward Remittance

The S1099 purpose code ensures that miscellaneous business transactions are tracked and categorized accurately. Payments that do not fit into predefined categories—such as advertising, software services, or consultancy—are still reported to the RBI under this purpose code.

Using the correct code ensures that payments are not delayed or misreported, which could lead to penalties under FEMA. The S1099 code plays a vital role for businesses engaged in specialized or less common services, ensuring compliance and transparency in foreign exchange operations.

Understanding Purpose Codes: Beyond S1099

Purpose codes help categorize different types of international transactions to facilitate compliance with RBI and FEMA. While the S1099 purpose code is used for services that don’t fit into other business categories, other codes exist for various types of activities, such as consultancy, advertising, and market research.

It is crucial to select the correct code to avoid misreporting, which could lead to regulatory scrutiny. For more information on other codes, refer to this list of purpose codes and guide on finding your purpose code. Misclassification can cause delays, so it's essential to use the right code for each remittance.

How to Select the Right Purpose Code for Your Transaction

Choosing the right purpose code is essential for ensuring your inward remittance complies with RBI and FEMA guidelines. The S1099 purpose code should be used when the business service does not align with any predefined categories like advertising or software development.

Before finalizing the transaction, verify the nature of the service to ensure it aligns with the S1099 code. Proper documentation—such as invoices or service agreements—should accompany the remittance to avoid discrepancies. If you're unsure which code applies to your transaction, consult with your bank or financial advisor to ensure compliance.

Conclusion: Ensuring Compliance with the S1099 Purpose Code

The S1099 purpose code is crucial for businesses offering miscellaneous services that do not fit into predefined categories. Using the correct code ensures compliance with RBI and FEMA regulations, facilitating smooth processing of foreign exchange inflows. Always verify the transaction type and select the appropriate purpose code to avoid delays or penalties. Proper documentation will further guarantee a seamless remittance process.

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As a freelancer or professional in India, managing your taxes doesn't have to be complicated. The government has introduced a simpler way through Section 44ADA of the Income Tax Act - the presumptive taxation scheme that lets you pay taxes on just 50% of your gross receipts, regardless of your actual expenses.

No more maintaining detailed books or tracking every expense. Whether you're a doctor, architect, lawyer, or freelance consultant, this scheme could significantly simplify your tax compliance while potentially reducing your tax burden.

In this guide, we'll break down everything you need to know about Section 44ADA - who can use it, the limits, how to file your income tax return, and common mistakes to avoid.&nbsp;

What is Section 44ADA of the Income Tax Act?

<a href="https://incometaxindia.gov.in/Acts/Finance%20Acts/2003/102120000000009718.htm">Section 44ADA</a> is a simplified tax calculation method for professionals and freelancers. Instead of tracking every expense and making complex calculations, these normal provisions assume that half of what you earn is your net profit.

Here's how it works: You earned ₹20 lakhs from your consultancy work this year. Under Section 44ADA, You can declare ₹10 lakhs (50% of your earnings) as your taxable income. The remaining ₹10 lakhs are considered to cover your business expenses - no questions asked, no proof needed.

This straightforward approach saves you from the hassle of maintaining detailed expense records while potentially reducing your tax burden.

Who is eligible for Section 44ADA of the Income Tax Act?&nbsp;

Not everyone can take advantage of Section 44ADA - designed specifically for certain eligible professionals and small business structures. Let's break down who can benefit from this presumptive scheme.

If you're working in any of these fields, you're likely eligible:

For example, if you're a doctor running your clinic as an individual practitioner or in partnership with other doctors, you can opt for Section 44ADA. However, if you've structured your practice as an LLP or a private limited company, you won't be eligible for this scheme.

Remember, just because you're in one of these professions doesn't automatically mean you should opt for Section 44ADA. The decision should depend on your actual expenses and business circumstances. 

What are the limits under 44ADA of the Income Tax Act?&nbsp;

To use Section 44ADA, your professional income must stay within certain limits.&nbsp;

Here's what you need to know about these thresholds:&nbsp;

₹50 Lakhs If you're receiving payments through any means (cash, cheque, or online transfers), you can use Section 44ADA as long as your total professional income doesn't exceed ₹50 lakhs in a financial year.

&nbsp;₹75 Lakhs There's good news if you mostly receive digital payments. You can enjoy a higher limit of ₹75 lakhs if you meet this condition:

Scenario 1: A consultant earning ₹60 lakhs annually:

Scenario 2: A lawyer earning ₹55 lakhs annually:

💡Important: When we say "cash receipts," this includes not just physical cash but also bearer cheques and bank drafts that aren't account payee. To stay safe, always insist on account payee cheques or digital payments from your clients.

Taxable Income under 44ADA of Income Tax Act&nbsp;

Let's examine how your taxable income is calculated under Section 44ADA—it's simpler than you might think.

Under Section 44ADA, the tax department assumes half of your turnover is your profit. Here's how it works in practice:

Let's say you're a freelance architect who earned ₹40 lakhs this year:

📚Note: Once you calculate your income this way, you can't claim any additional expenses. The 50% calculation is final - even if your actual expenses were higher or lower.

Can you declare more than 50%?&nbsp;

Yes! The 50% is just the minimum. If your actual profit is higher, you should declare the higher amount. For example, if your real expenses were only ₹15 lakhs on a ₹40 lakh income, you should declare ₹25 lakhs as your taxable income.

A consultant earns ₹30 lakhs in a year:

Remember, this simplified calculation is one of the biggest advantages of Section 44ADA - no need for detailed bookkeeping or expense tracking!

Let's clear up a common confusion - Section 44ADA doesn't have its special tax rates. Instead, after calculating your taxable income as 50% of your gross receipts, you'll pay taxes according to regular income tax slab rates.

Here's a practical example: Imagine you're a freelance consultant earning ₹30 lakhs annually:

Choose your tax regime based on your overall tax situation, including available deductions and other income sources.

The only thing Section 44ADA does is help you calculate your professional income easily - it doesn't change how that income is taxed. You'll still need to pay taxes according to the normal income tax slabs applicable to you.&nbsp;

Section 44ADA of Income Tax Act with Example&nbsp;

Here, we look at two practical examples to understand how Section 44ADA impacts your tax calculations.