I’m an independent contractor based in India and I’m trying to correctly determine whether my AI-related consulting/evaluation income can legitimately be taxed under Section 44AD at 6%, or whether I fall under 44ADA / normal taxation.

I’m specifically looking for opinions from CAs, tax professionals, or people who have dealt with a similar situation. I want to understand the correct classification and file properly.

My work

My work is primarily related to AI model evaluation and training.

Some of the actual activities include:

• Evaluating AI/LLM model responses
• Comparing and ranking model outputs
• Applying evaluation criteria/rubrics
• Identifying errors, hallucinations and quality issues
• Providing feedback for improving AI models
• Performing AI model training/evaluation tasks
• Analysing model behaviour and outputs
• Creating/reviewing material used for AI model improvement

My tax question

I understand that:

Section 44AD can potentially allow presumptive income of:

• 6% of qualifying receipts received through banking/digital modes
• 8% for other qualifying receipts

while Section 44ADA generally provides 50% presumptive income for specified professions, subject to its conditions and limits.

My concern is that the Income Tax Department's current AY 2026-27 material lists several activities as not eligible for 44AD, including:

• Software development
• Other software consultancy
• Data processing
• Engineering & technical consultancy
• Business & management consultancy

However, I noticed that the ITR classification also contains:

15002 — Research & Development — Social sciences and humanities

and

15003 — Other Research & Development activities n.e.c.

From what I can see, 15002 and 15003 don't appear in the current list of codes specifically excluded from 44AD.

This made me wonder whether AI model evaluation/training could potentially fall under 15003 — Other R&D activities n.e.c., rather than software development, software consultancy or technical consultancy.

Why I think 15003 may be relevant

The actual work isn't primarily writing/developing software.

The core activity is evaluating AI models, analysing their outputs, identifying problems, comparing responses, applying evaluation methodologies and providing feedback used to improve/train the models.

I'm wondering whether this could reasonably be considered R&D activity.

At the same time, I understand that simply selecting an ITR code that isn't on the 44AD exclusion list does not necessarily mean that the activity automatically qualifies for 44AD.

That's exactly what I'm trying to clarify.

Questions

1. Can AI model evaluation/training legitimately fall under ITR code 15003 — Other R&D activities n.e.c.?
2. If 15003 accurately describes the actual activity, would that make the income eligible for Section 44AD, assuming all other 44AD conditions are satisfied?
3. Does AI model evaluation/training instead fall under technical consultancy / information technology, making 44ADA or normal taxation applicable?
4. Does the actual nature of the work matter more than the contractual job title?

Example of the financial impact

This is why I'm trying to get the classification right.

If I earn around ₹1 crore/year:

If 44AD at 6% were legitimately available:

₹1 crore × 6% = ₹6 lakh presumptive taxable income

That is obviously dramatically different from normal taxation on actual profit.

On the other hand, if my activity is considered a specified profession and 44ADA is applicable, the 44ADA ₹75 lakh threshold becomes relevant, and above that I would need to consider normal taxation.

I don't want to choose 44AD simply because it results in lower tax. I want to know whether it is legally and factually defensible for the actual work I'm doing.

What I'm looking for

If anyone here is a CA/tax practitioner or has handled AI evaluation, AI training, AI data work, model evaluation, R&D or similar independent-contractor work, I'd really appreciate your view.

In particular, I'd be interested in:

AI evaluation/training → ITR code 15003 → Section 44AD

Is this a defensible position, or am I misunderstanding the relationship between the ITR business code and Section 44AD?

I'm looking for the correct classification.

Thanks!

Hi everyone,

I’m a software professional working as a consultant/freelancer in India, and I’m trying to plan my taxes properly for FY 2026–27.

Here is my situation:

• I currently operate as a sole proprietorship.
• My contractor/client will not send payments to any other account/entity, so all receipts will continue to come directly to me personally.

I am considering whether it makes sense to:

1. Continue as an individual/sole proprietor and claim genuine business expenses.
2. Set up an OPC.
3. Set up a Private Limited Company.
4. Consider some other legitimate structure or tax-planning approach.

For example, if I have ₹90 lakh of professional profit before expenses, I could potentially have genuine expenses such as employee salaries, software/cloud subscriptions, laptop/equipment, office/coworking expenses, professional fees, internet, business travel, etc.

I'm not looking for fake expenses or tax evasion. I'm trying to understand what legitimate tax-planning options are available and what experienced people would recommend.

Questions for CAs / tax professionals / software consultants:

• Since 44ADA will not be useful at this income level, what are the practical and legal ways to reduce overall tax liability for a software consulting income of ~₹80–90L?
• I don’t really have too many business expenses apart from basic software subscriptions, laptop, internet, etc. What all can be legitimately shown as business expenses in such a case?
• Are there any commonly used tax-saving strategies for freelancers/consultants at this income level that I should discuss with my CA?
• In a situation where expenses are limited, how do people usually structure their income to optimize taxes without doing anything non-compliant?

I'd really appreciate real-world experiences, especially from people earning ₹70L–₹1Cr+ through software consulting/freelancing in India.

Thanks!

Hi everyone,

I’m a software professional working as a consultant/freelancer in India, and I’m trying to plan my taxes properly for FY 2026–27.

Here is my situation:

• I currently operate as a sole proprietorship.
• My contractor/client will not send payments to any other account/entity, so all receipts will continue to come directly to me personally.

I am considering whether it makes sense to:

1. Continue as an individual/sole proprietor and claim genuine business expenses.
2. Set up an OPC.
3. Set up a Private Limited Company.
4. Consider some other legitimate structure or tax-planning approach.

For example, if I have ₹90 lakh of professional profit before expenses, I could potentially have genuine expenses such as employee salaries, software/cloud subscriptions, laptop/equipment, office/coworking expenses, professional fees, internet, business travel, etc.

I'm not looking for fake expenses or tax evasion. I'm trying to understand what legitimate tax-planning options are available and what experienced people would recommend.

Questions for CAs / tax professionals / software consultants:

• Since 44ADA will not be useful at this income level, what are the practical and legal ways to reduce overall tax liability for a software consulting income of ~₹80–90L?
• I don’t really have too many business expenses apart from basic software subscriptions, laptop, internet, etc. What all can be legitimately shown as business expenses in such a case?
• Are there any commonly used tax-saving strategies for freelancers/consultants at this income level that I should discuss with my CA?
• In a situation where expenses are limited, how do people usually structure their income to optimize taxes without doing anything non-compliant?

I'd really appreciate real-world experiences, especially from people earning ₹70L–₹1Cr+ through software consulting/freelancing in India.

Thanks!