Income Tax

Freelance (44ADA) vs Salary

See the massive tax advantage of operating as a Freelancer / Consultant under Section 44ADA compared to a traditional salaried employee.

Annual Gross Income

Note: Section 44ADA is applicable for gross receipts up to ₹75 Lakhs (if cash receipts are <5%).

As Salaried Employee
Gross Salary₹20,00,000
Taxable Income (New Regime)₹19,50,000
Total Tax₹2,96,400

In-Hand Income

₹17,03,600

As Freelancer (44ADA)
Gross Receipts₹20,00,000
Taxable Income (50% Exempt)₹10,00,000
Total Tax₹62,400

In-Hand Income

₹19,37,600

Tax Savings

You save

₹2,34,000

every year by switching to a consultant contract.

What is Section 44ADA?

Section 44ADA is a presumptive taxation scheme designed by the IT Department for professionals (IT, Legal, Medical, Engineering, Architecture, etc.). It assumes that 50% of your gross receipts are your business expenses.

Therefore, you only pay tax on the remaining 50% of your income. You do not need to maintain complex books of accounts or keep receipts for expenses. If you are a high-earning software engineer, asking your employer to hire you as a "Consultant" rather than an "Employee" can literally save you lakhs in taxes legally.