1Can a contractor use the 44AD presumptive scheme?
Yes, if turnover is within Rs 2 crore (Rs 3 crore where cash is 5% or less). Declare 8% (6% on digital receipts) as income with no audit — but thin-margin contractors may do better on actual books.
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ArticleCivil, works and labour contractors earn business income that usually arrives after TDS from the parties they bill. Here's how contractors can save tax and stay compliant.
Reviewed by CA Harika Chebolu, FCA · Last updated 2026-06-13
Quick answer
Contractors earn business income with TDS — so the 44AD scheme, full cost claims, 26AS reconciliation and advance tax are the levers. Here's how.
If your turnover is within Rs 2 crore (Rs 3 crore where cash receipts are 5% or less), Section 44AD lets you declare 8% of turnover (6% on digital receipts) as income with no audit and no detailed books. For many small contractors this is simpler and lighter on tax.
If your real margin is below the presumptive rate, keep books and deduct genuine costs — materials, labour and sub-contractor payments, equipment hire and depreciation, transport, site expenses and fuel. Low-margin contracts often do better on actual books.
The parties you bill deduct TDS on contract payments, which shows in your 26AS/AIS. Claim full credit for it against your final tax and report all receipts the AIS shows — contractors commonly leave TDS credit unclaimed.
Payments to sub-contractors and labour are deductible costs, but you may need to deduct TDS on certain payments yourself. Handling your own TDS obligations correctly keeps the expenses fully allowable and avoids disallowance.
On your personal return, use 80C, the Rs 50,000 NPS and 80D health insurance in the old regime. Estimate income after costs and pay advance tax in the four instalments if your tax exceeds Rs 10,000, to avoid 234B/234C interest.
Yes, if turnover is within Rs 2 crore (Rs 3 crore where cash is 5% or less). Declare 8% (6% on digital receipts) as income with no audit — but thin-margin contractors may do better on actual books.
Yes — TDS is only an advance; contract income is taxed at your slab. Claim full credit for the TDS in your 26AS and report all receipts your AIS shows.
Yes, when you keep books — materials, labour, sub-contractor payments, equipment and site costs are deductible. Handle your own TDS on such payments so the expenses stay fully allowable.
Running contracts with TDS deducted? Write to the firm and we'll claim every credit and cost, and handle your own TDS.