Which ITR should a travel agent file? Mind the 44AD trap

Every July, the same question does the rounds on CAclubindia and in agent WhatsApp groups: "ITR-3 or ITR-4 for a travel agency?" The honest answer is: it depends on how you actually earn, not what your visiting card says.

If you run on commission, agency fees, or brokerage, Section 44AD probably isn't open to you at all, no matter how small your turnover is. If you buy net rates and sell packages at your own price, you may qualify for presumptive taxation and the simpler ITR-4. Get this wrong and you either overpay tax by skipping a scheme you were eligible for, or you file on a form you weren't allowed to use, which can unravel at scrutiny.

This post walks through the decision: your business model, the scheme it opens up, and the ITR form that follows.

Agent or operator: the distinction that decides your ITR

Your ITR form is decided by one question: are you paid a commission for arranging someone else's product, or are you buying and reselling a package at your own risk and price?

A pure commission agent earns a cut for booking a flight, hotel, or visa slip on someone else's behalf. The money that passes through your account for the client's ticket or hotel isn't your income; your commission is. This is an agency or brokerage business in the eyes of the Income Tax Act.

A package-selling tour operator does something different. You negotiate a net rate with a hotel or a DMC, mark it up, and sell the package as your own product at your own price. The client is buying from you, not through you. This is treated as carrying on a business, not agency work, even though you're still in the travel trade.

Most small operators do both at once: commission on flight and hotel bookings for some clients, packaged tours sold at a markup for others. If that's you, the 44AD question has to be answered separately for each stream, not for the agency as a whole. This is the same principal-versus-agent split that shapes how the money actually flows between B2C, B2B, and DMC arrangements, so if that distinction is fuzzy in your own contracts, sort it there first.

Why 44AD locks out most commission-based travel agents

Section 44AD lets eligible businesses declare a flat percentage of turnover as taxable profit and skip maintaining detailed books, but it specifically excludes commission and brokerage businesses, which covers most travel agency income.

If your income is commission on flight tickets, hotel bookings, or visa processing, that income is earned through agency, and 44AD isn't available for it, regardless of how small your turnover is or how simple your books look. This is the trap in the question "can a travel agent use 44AD": the scheme was built for traders, contractors, and professionals with straightforward turnover, not for businesses that earn a percentage of someone else's transaction.

If commission is your only income stream, you file ITR-3 and maintain regular books under the normal provisions, not ITR-4. Worth knowing this doesn't touch your GST position separately; the ₹20 lakh GST registration threshold is a different test from the ₹2 crore-plus 44AD turnover cap below, and clearing one says nothing about the other.

The exception: when a package-selling operator can use 44AD

If you buy travel services at a net rate and sell them as your own packaged product, that income isn't commission or brokerage; it's turnover from a business you run at your own risk, which is exactly what Section 44AD's presumptive scheme is meant to cover.

Say you run 12 Ladakh departures a summer and sell each seat as a fixed-price package, buying hotel rooms and permits on your own account and pricing the trip yourself. That income stream looks like trading income for tax purposes, not agency income, so it can potentially use 44AD if you're within the turnover limits below.

The same operator could still have a second stream, say IRCTC ticketing commission for the same clients, that stays excluded from 44AD because it's commission income. Two income streams from one agency, two different tax treatments. This is exactly the kind of fact-specific call where "confirm with your CA" isn't a hedge, it's the correct next step, because whether a specific arrangement counts as "your own package" or "arranging on someone else's behalf" depends on the actual contracts and cash flows, not on how you describe the business.

6% or 8%: how the presumptive rate is set

If your eligible business income is under 44AD, the deemed profit is 8% of turnover for cash receipts and 6% for turnover received digitally (bank transfer, UPI, cards), with an overall turnover cap of ₹2 crore, extended to ₹3 crore if cash receipts stay under 5% of total turnover (figures as of July 2026; confirm current limits with your CA before filing).

Example: Say your package-selling turnover for FY 2025-26 is ₹80 lakh: ₹60 lakh received via UPI, cards, and bank transfer, and ₹20 lakh in cash. Under 44AD, your deemed profit is (₹60,00,000 × 6%) + (₹20,00,000 × 8%) = ₹3,60,000 + ₹1,60,000 = ₹5,20,000. That figure is taxed at your slab rate, whether or not your actual profit margin was higher or lower.

Notice the incentive built into the rate difference: pushing clients toward digital payment over cash doesn't just help with reconciliation, it lowers your deemed presumptive profit for the same turnover.

Careful: these are deemed profits, not your real ones. If your genuine margin on packaged tours is lower than 6-8% of turnover, presumptive taxation can mean paying tax on profit you didn't actually make. Run the comparison against your real costing before opting in, ideally against the numbers in your tour costing sheet, not just your bank statement.

ITR-4 vs ITR-3: matching the form to your setup

ITR-4 (Sugam) is meant for taxpayers filing under the presumptive schemes in Section 44AD or 44AE, who aren't maintaining regular books of account. If your package-selling income is eligible for 44AD and you choose to opt in, this is your form.

ITR-3 is for everyone else running a proprietorship business: commission agents excluded from 44AD by the nature of their income, operators above the presumptive turnover limit, and anyone who maintains regular books and wants to report actual profit rather than a deemed figure. ITR-3 requires a full profit and loss account and balance sheet, not a one-line turnover-and-profit entry.

Your situation	Scheme	ITR form
Pure commission/agency income	44AD not available	ITR-3, regular books
Package sales, eligible, opted in	44AD presumptive	ITR-4 (Sugam)
Package sales, above turnover cap or opted out	Regular provisions	ITR-3, regular books
Mixed commission + package income	Split by stream	Often ITR-3 (safer where any income is excluded)

If you run both a commission stream and a package-selling stream, most operators end up filing ITR-3 anyway, since it can report both types of income together, while ITR-4 is built around a single presumptive computation. Ask your CA whether your specific mix still lets you claim 44AD treatment on the eligible package-selling portion while filing ITR-3 overall, since the mechanics vary by case.

The 5-year lock-in nobody reads before opting out

Once you opt into Section 44AD and then opt out before completing five continuous years in the scheme, you're barred from re-entering presumptive taxation for the next five assessment years.

This catches operators who opt in during a good year for the lower compliance burden, then want to opt back in during a lean year to save on paperwork, not realising the door closed the moment they stepped out early. If you're on the fence about presumptive taxation, treat the first year as a multi-year commitment, not a year-by-year toggle, and get your CA's view before you opt in or out.

What if you don't qualify for presumptive taxation

If your income is commission-based, or your eligible turnover crosses the presumptive limits, you fall back to the normal provisions: regular books of account and a computed profit, filed on ITR-3.

Whether a tax audit applies at that point depends on your turnover, your proportion of cash receipts, and thresholds under Section 44AA and 44AB that move periodically. Those audit thresholds are a separate question from the 44AD limits above and change more often than most operators expect, so don't assume either way. This is a "confirm with your CA before the July filing rush" line item, not a guess-and-file one.

If you've incorporated the agency as a company rather than running it as a proprietorship or partnership, most of this presumptive-taxation discussion stops applying to you the same way: companies are taxed under a different set of rules and file a different ITR form altogether. This post is written for the proprietorships and partnerships that actually weigh 44AD against ITR-3, which is most small and mid-sized agencies.

Common questions

Can a commission-based travel agent use 44AD?

No. Section 44AD explicitly excludes businesses earning commission or brokerage, and most travel agency income (ticketing, hotel booking, visa processing) falls in that category. Commission agents file ITR-3 under the regular provisions, maintaining books of account, regardless of how small their turnover is.

ITR-3 or ITR-4 for a tour operator?

It depends on the income type and whether you've opted into presumptive taxation. Package-selling income that qualifies under 44AD, and where you've opted in, goes on ITR-4. Commission income, income above the presumptive turnover cap, or income where you're maintaining full books goes on ITR-3.

What's the tax audit limit for a travel agency?

There isn't a single travel-agency-specific number; audit applicability depends on your turnover, cash-versus-digital receipt mix, and whether you're within or outside presumptive taxation, under thresholds that are revised periodically. Confirm the current figures for your situation with your CA rather than relying on a remembered number from a previous year.

Can I switch back to presumptive taxation after opting out?

Only if you opted out after completing five continuous years in the scheme. Opt out earlier than that and you're locked out of presumptive taxation for the following five assessment years, so treat the decision to exit as a long-term one, not a single-year choice.

The short version

• Commission and brokerage income (most flight, hotel, and visa booking work) is excluded from Section 44AD; file it on ITR-3 with regular books, whatever your turnover.
• Package-selling income, where you buy net rates and resell at your own price, can potentially qualify for 44AD presumptive taxation and ITR-4, subject to the turnover limits.
• Presumptive profit is deemed at 8% of turnover for cash receipts and 6% for digital receipts, capped at ₹2 crore turnover (₹3 crore if cash stays under 5%), as of July 2026.
• Run the deemed-profit maths against your actual margins before opting in; a low-margin package business can end up taxed on profit it didn't earn.
• Opting out of 44AD before five continuous years locks you out of re-entering for the next five assessment years.
• Mixed agencies (commission plus package sales) usually end up on ITR-3, since it can report both income types together.
• When in doubt about which stream is "agency" versus "your own business," or whether a tax audit applies, get your CA's read before the filing deadline, not after a notice.