Real Estate Agents Filing ITR Under 44ADA or Business Head?
- PRITI SIRDESHMUKH
- Sep 15, 2025
- 9 min read
For real estate professionals, understanding the correct way to report income and file Income Tax Returns (ITR) is crucial to avoid penalties and optimize tax compliance. Income earned through real estate activities can fall under different categories depending on the nature of the work, the turnover, and whether the business involves regular sales or professional services. Many taxpayers often get confused between professional income under Section 44ADA and business income under Section 44AD or regular business income. Choosing the right ITR form, accurately calculating income, and understanding applicable presumptive schemes can save time, reduce tax liability, and ensure hassle-free filing. Platforms like TaxBuddy provide guidance tailored for real estate agents, helping them navigate these requirements efficiently while ensuring compliance with the latest Income Tax regulations.
Table of Contents
Real Estate Income: Professional or Business?
Income from real estate activities can fall under two main categories for tax purposes: professional income and business income. The classification depends primarily on the nature, scale, and frequency of the transactions, as well as the role of the individual earning the income.
Business Income in Real Estate Individuals or entities engaged in real estate as a commercial activity usually earn business income. This includes real estate agents, brokers, and companies involved in buying, selling, or renting properties for profit. For these taxpayers, commissions, brokerage fees, or profits from property sales are treated as business income under the Income Tax Act. Such income is taxable under Profit and Gains of Business or Profession, and taxpayers are required to maintain detailed accounts, including purchase and sale records, operational expenses, and any statutory compliances related to their business activities. These taxpayers typically file ITR-3 or ITR-5, depending on their legal structure.
Professional Income in Real Estate On the other hand, professionals who provide specialized advisory or consultancy services in real estate are treated as earning professional income. This category includes property consultants, valuation experts, or architects offering real estate advisory services. Their earnings—such as consulting fees or advisory charges—are classified as income from profession, and the taxation is simpler compared to business income, often requiring only ITR-4 or ITR-3, depending on the taxpayer’s overall income and nature of services.
Importance of Correct Classification Determining whether real estate income is business or professional income is crucial. The classification affects:
Applicable deductions: Business expenses are often broader and may include operational and marketing costs, while professional expenses are limited to those directly related to service provision.
ITR forms: Filing under the wrong form can trigger scrutiny or notices from the Income Tax Department.
Tax compliance and audit: Business income exceeding specified thresholds may require statutory audits under Section 44AB, whereas professional income usually has no audit unless turnover crosses certain limits.
Understanding Section 44ADA
Section 44ADA of the Income Tax Act provides a presumptive taxation scheme for professionals like doctors, lawyers, engineers, and architects, allowing them to declare 50% of their gross receipts as taxable income, simplifying compliance. This section is designed for individual professionals or partnership firms with gross receipts up to ₹50 lakh in a financial year. It eliminates the need to maintain detailed books of accounts while allowing for easier computation of taxable income.
Why Section 44ADA Does Not Apply to Real Estate Agents
Real estate agents, brokers, and property dealers do not qualify under Section 44ADA, as it is intended for professionals offering technical or advisory services. Since agents earn income primarily through commissions from transactions rather than providing professional services, their income is treated as business income. Applying 44ADA in these cases would be incorrect and could invite scrutiny from the Income Tax Department.
Filing ITR Under Business Head
Real estate agents should report income under the business head while filing ITR. This classification requires accurate computation of gross receipts, allowable expenses, and profit. Depending on turnover and bookkeeping practices, agents can opt for regular business income reporting or consider presumptive taxation schemes to simplify filing and compliance. Correct classification ensures smooth processing of returns and avoids discrepancies during assessment.
Presumptive Taxation for Real Estate Agents Under Section 44AD
Section 44AD offers presumptive taxation for small businesses, including real estate agents, with turnover up to ₹2 crore. Under this scheme, 8% of the total turnover or gross receipts is deemed as taxable income. Agents opting for 44AD do not need to maintain detailed books of accounts, making filing easier and reducing compliance burden. However, once this scheme is chosen, it must be consistently applied unless opting out for specific reasons.
Choosing Between ITR-3 and ITR-4 for Real Estate Income
Real estate agents must select the appropriate ITR form based on their income reporting method. ITR-3 is suitable for those reporting income under the regular business head with detailed accounting, while ITR-4 applies to those opting for presumptive taxation under Section 44AD. Choosing the correct form is essential for accurate filing, claiming deductions, and avoiding errors that can delay processing or attract penalties.
Comparison: 44ADA vs 44AD vs Regular Business Income
Aspect | Section 44ADA | Section 44AD | Regular Business Income |
Applicable Professionals | Doctors, lawyers, etc. | Small business owners, agents | All businesses |
Gross Receipts Limit | ₹50 lakh | ₹2 crore | No limit |
Presumptive Rate | 50% of gross receipts | 8% of turnover/receipts | Actual profit after expenses |
Bookkeeping Requirement | Minimal | Minimal | Full accounts |
Tax Filing Form | ITR-3 | ITR-4 | ITR-3 |
This comparison helps real estate agents understand which regime is suitable and compliant.
Practical Tips for Smooth Tax Filing
Maintain Accurate Records of All Commissions and Receipts Keeping a meticulous record of all commissions earned and other receipts is crucial for accurate tax reporting. Every payment received from clients, whether in cash, bank transfer, or digital modes, should be documented and categorized properly. This includes commissions from sales, services rendered, or performance-based incentives. Maintaining detailed records helps in calculating taxable income correctly and provides evidence in case of scrutiny by the Income Tax Department. Using accounting software or a dedicated ledger can simplify tracking, reduce errors, and make filing ITR smoother.
Keep Track of Business-Related Expenses Like Marketing, Travel, and Office Rent Business-related expenses are deductible under the Income Tax Act, reducing the taxable income. Maintaining detailed records of expenses such as marketing campaigns, travel for business purposes, office rent, utility bills, and equipment purchases is essential. Receipts, invoices, and bills should be preserved in an organised manner, categorised by type, and recorded in accounting software or spreadsheets. Proper documentation ensures that expenses claimed are verifiable and compliant with tax laws, avoiding disallowance during assessments.
Verify PAN Details of Clients and TDS Deductions Where Applicable Accurate PAN details of clients are necessary to ensure proper reporting of income and correct TDS (Tax Deducted at Source) deductions. Cross-checking PAN numbers before issuing invoices or receiving payments prevents errors in TDS statements and mismatches in ITR filing. Additionally, tracking TDS deducted by clients on payments received ensures proper credit in the Income Tax system, which is essential to avoid delays in refunds or unnecessary tax liabilities.
Choose the Right ITR Form and Taxation Scheme Selecting the correct ITR form based on the nature of income and business structure is critical. For example, salaried individuals may use ITR-1 or ITR-2, whereas professionals or businesses might require ITR-3 or ITR-4. Along with this, choosing the appropriate taxation scheme—regular income taxation, presumptive taxation under Sections 44ADA or 44AD, or opting for the new tax regime—affects deductions, exemptions, and final tax liability. Using the wrong form or scheme can lead to errors, notices from the tax department, and delayed refunds.
File Returns Before the Deadline to Avoid Penalties Timely filing of ITR is vital to remain compliant and avoid penalties. Filing after the due date attracts late filing fees and interest on unpaid taxes. For FY 2024-25, individuals and non-audit assessees have the extended deadline of September 15, 2025, while businesses requiring audit have a later deadline. Filing before these deadlines also ensures faster processing of refunds and reduces the risk of notices for delayed or incorrect filings. Platforms like TaxBuddy can help streamline this process, making filing simple, accurate, and timely.
How TaxBuddy Helps Real Estate Agents File ITR Efficiently
Platforms like TaxBuddy simplify the filing process for real estate agents by providing clear guidance on income classification, selecting the correct ITR form, and computing presumptive taxation under 44AD. TaxBuddy’s mobile app allows users to upload documents, track refunds, and file ITR securely without complex manual calculations, ensuring compliance and reducing errors.
Conclusion
Real estate agents must understand the difference between professional and business income and choose the correct tax regime for filing ITR. Presumptive taxation under Section 44AD simplifies compliance for small agents, while detailed reporting is necessary for larger operations. Platforms like TaxBuddy streamline this process, offering expert guidance and seamless filing solutions. For real estate agents looking for assistance in tax filing, it is highly recommended to download theTaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does Section 44ADA apply to real estate agents? No, Section 44ADA is specifically designed for professionals like doctors, lawyers, engineers, architects, and other specified professions. Real estate agents do not fall under this category since their income is classified as business income rather than professional income. Therefore, they cannot claim the benefits under 44ADA.
Q2. Can real estate agents use Section 44AD? Yes, real estate agents whose total turnover or gross receipts do not exceed ₹2 crore in a financial year can opt for the presumptive taxation scheme under Section 44AD. Under this scheme, 8% of the turnover (or 6% if digital payments are received) is considered taxable, simplifying compliance and reducing the need for detailed bookkeeping.
Q3. Which ITR form should real estate agents file? Real estate agents who choose the presumptive taxation scheme under 44AD should file ITR-4. Agents who maintain detailed accounts and do not opt for presumptive taxation must file ITR-3, which is applicable for individuals and HUFs with business or professional income under regular provisions.
Q4. Are detailed books of accounts required under Section 44AD? No, one of the main advantages of Section 44AD is simplified compliance. Detailed books of accounts are not required. Agents need only maintain basic records to justify turnover and payments received, which reduces the administrative burden compared to regular business accounting.
Q5. Can a taxpayer switch between 44AD and regular taxation? Yes, a real estate agent can switch between presumptive taxation under 44AD and regular income reporting. However, consistency is required for subsequent years. If an agent opts out of the presumptive scheme in any year, they must maintain regular accounts and follow standard taxation rules in future years.
Q6. How is commission income reported? Commission income earned by real estate agents is reported under the head “Profits and Gains of Business or Profession” in the income tax return. Agents should accurately report all commission received, including digital transfers, cash, or cheques, to ensure correct tax calculation and compliance.
Q7. Are business expenses deductible under Section 44AD? Under Section 44AD, expenses are not separately claimed. Instead, a fixed percentage of turnover—8% for cash and digital payments, or 6% if receipts are only digital—is automatically considered as taxable income. This percentage already accounts for business expenses, simplifying calculations for the taxpayer.
Q8. What if turnover exceeds ₹2 crore? If a real estate agent’s turnover exceeds ₹2 crore in a financial year, the presumptive scheme under Section 44AD cannot be applied. The agent must switch to regular business income reporting, maintain detailed books of accounts, and calculate tax based on actual profits after deducting eligible business expenses.
Q9. Is TDS applicable to real estate agents? Yes, Tax Deducted at Source (TDS) may apply to commission income under Section 194H. If the payer of the commission is required to deduct TDS, the agent will receive income net of TDS, which can later be claimed while filing the ITR. Proper tracking of TDS certificates (Form 16A) is essential for accurate filing.
Q10. Can TaxBuddy assist in choosing the right ITR form? Yes, TaxBuddy provides personalized guidance to help real estate agents select the correct ITR form—whether ITR-4 for presumptive taxation or ITR-3 for regular business income. It ensures compliance with applicable sections like 44AD, 44ADA, and 194H, minimizing errors in form selection.
Q11. How does TaxBuddy simplify filing for real estate agents? TaxBuddy allows secure upload of all income and expense documents. It automatically computes taxable income, calculates TDS, and pre-fills details in the correct ITR form. This ensures error-free filing, reduces manual effort, and saves time, particularly for agents with multiple sources of commission income.
Q12. Can real estate agents track refunds via TaxBuddy? Yes, agents can track the status of their income tax refunds seamlessly through TaxBuddy. The platform provides real-time updates on processing, e-verification, and the status of refunds, ensuring transparency and timely follow-ups without the need to navigate the Income Tax Department portal manually.
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