44AD Applicability and Exit
This query is : Resolved
14 July 2024
Hi,
This is the summary of my ITR's.
FY 12-13 -> 44AD -> ITR 4S
Turnover - Rs. 301184
Profit - Rs. 301184
FY 13-14 -> 44AD -> ITR 4S
Turnover - Rs. 240000
Profit - Rs. 240000
FY 14-15
NO BUSINESS INCOME -> NO 44AD -> ITR 2
FY 15-16
NO BUSINESS INCOME -> NO 44AD -> ITR 1
FY 16-17
NO BUSINESS INCOME -> NO 44AD -> ITR 2
FY 17-18 -> 44AD -> ITR 4
Turnover - Rs. 750000
Profit - Rs. 750000
FY 18-19
NO BUSINESS INCOME -> NO 44AD -> ITR 3
FY 19-20
NO BUSINESS INCOME -> NO 44AD -> ITR 3
FY 20-21 -> NO 44AD -> NO AUDIT -> ITR 3
Turnover - Rs. 80,93,584
Profit - Rs. 7,72,655 (>6%)
FY 21-22
NO BUSINESS INCOME -> NO 44AD -> ITR 2
FY 22-23 -> 44AD -> ITR 3
Turnover - Rs. 2,020
Profit - Rs. 1,010
Very Confused regarding 44AD !
1. As per me, It seems i have exited 44AD in FY 20-21 after using it for many years and reentered it in FY 22-23. Now as per 44AD, i have to use to compulsorily for next 5 Years means FY 22-23 to FY 26-27. I want to declare profit less than 6% for shares F&O for FY 23-24. If i do so, i will have to maintain books under 44AA and audit under 44AB? (Turnover is Rs. 26 L and Profit is Rs. 36000)
2. If I opt for 44AD for FY 23-24 also and declare profit at 6%, then I can opt out of 44AD only in FY 27-28?
3. The years where there is no business income to report will be counted for the counting in 5 Years for maintaining 44AD?
Thanks in Advance.
This is the summary of my ITR's.
FY 12-13 -> 44AD -> ITR 4S
Turnover - Rs. 301184
Profit - Rs. 301184
FY 13-14 -> 44AD -> ITR 4S
Turnover - Rs. 240000
Profit - Rs. 240000
FY 14-15
NO BUSINESS INCOME -> NO 44AD -> ITR 2
FY 15-16
NO BUSINESS INCOME -> NO 44AD -> ITR 1
FY 16-17
NO BUSINESS INCOME -> NO 44AD -> ITR 2
FY 17-18 -> 44AD -> ITR 4
Turnover - Rs. 750000
Profit - Rs. 750000
FY 18-19
NO BUSINESS INCOME -> NO 44AD -> ITR 3
FY 19-20
NO BUSINESS INCOME -> NO 44AD -> ITR 3
FY 20-21 -> NO 44AD -> NO AUDIT -> ITR 3
Turnover - Rs. 80,93,584
Profit - Rs. 7,72,655 (>6%)
FY 21-22
NO BUSINESS INCOME -> NO 44AD -> ITR 2
FY 22-23 -> 44AD -> ITR 3
Turnover - Rs. 2,020
Profit - Rs. 1,010
Very Confused regarding 44AD !
1. As per me, It seems i have exited 44AD in FY 20-21 after using it for many years and reentered it in FY 22-23. Now as per 44AD, i have to use to compulsorily for next 5 Years means FY 22-23 to FY 26-27. I want to declare profit less than 6% for shares F&O for FY 23-24. If i do so, i will have to maintain books under 44AA and audit under 44AB? (Turnover is Rs. 26 L and Profit is Rs. 36000)
2. If I opt for 44AD for FY 23-24 also and declare profit at 6%, then I can opt out of 44AD only in FY 27-28?
3. The years where there is no business income to report will be counted for the counting in 5 Years for maintaining 44AD?
Thanks in Advance.
14 July 2024
1. Correct
2. Correct.
3. Yes.
2. Correct.
3. Yes.
14 July 2024
Hello Sir,
Reframing my understanding, as I re opted for 44AD in FY 22-23, I need to maintain 44AD for 5 Years including FY 22-23; means FY 22-23 to FY 26-27. Also, I can opt out from 44AD for FY 27-28 without any punishment.
1. If I opt out of 44AD for FY 23-24, I will not be allowed to take 44AD for 5 subsequent years. Means, from FY 23-24 to FY 28-29. I can opt back to 44AD for FY 29-30 only.
2. If I opt out of 44AD for FY 23-24, I have to get my books maintained and audited for FY 23-24 at any condition of turnover or profit?
3. If I opt out of 44AD for FY 23-24, is it a compulsion to get audited every year for the next 5 years if I have even the slightest of business income, or will the general audit rules start to apply ?
4. If I opt out of 44AD for FY 23-24, and do not have, say any business income in FY 24-25, do I need to still get audited and maintain accounts ? Also, will this FY 24-25 be counted as a year for which 44AD is not available as punishment as I have opted out of it in FY 23-24 ?
Thanks in Advance.
Reframing my understanding, as I re opted for 44AD in FY 22-23, I need to maintain 44AD for 5 Years including FY 22-23; means FY 22-23 to FY 26-27. Also, I can opt out from 44AD for FY 27-28 without any punishment.
1. If I opt out of 44AD for FY 23-24, I will not be allowed to take 44AD for 5 subsequent years. Means, from FY 23-24 to FY 28-29. I can opt back to 44AD for FY 29-30 only.
2. If I opt out of 44AD for FY 23-24, I have to get my books maintained and audited for FY 23-24 at any condition of turnover or profit?
3. If I opt out of 44AD for FY 23-24, is it a compulsion to get audited every year for the next 5 years if I have even the slightest of business income, or will the general audit rules start to apply ?
4. If I opt out of 44AD for FY 23-24, and do not have, say any business income in FY 24-25, do I need to still get audited and maintain accounts ? Also, will this FY 24-25 be counted as a year for which 44AD is not available as punishment as I have opted out of it in FY 23-24 ?
Thanks in Advance.
14 July 2024
1. to 3 correct, but add one more years, it is five years after the year of opting out.
4. No business no question of books or audit. Yes it is counted as usual year of punishment.
4. No business no question of books or audit. Yes it is counted as usual year of punishment.
14 July 2024
1. If I opt out of 44AD in FY 23-24 I will get accounts maintained and audited. Compulsory Audit now for next 5 years also. Say in FY 24-25, I have salary income, long and short term capital Gain and share dividend income. So if this dividend income is shown in Income from other sources, can I skip compulsory audit as punishment and file ITR 2?
2. If I opt out of 44AD in FY 23-24 I will get accounts maintained and audited. Compulsory Audit now for next 5 years also. Say in FY 24-25, I have salary income, long and short term capital Gain and profit for being a partner in partnership firm. As this profit is already taxed in partnership firm it will be exempt in my hands and shown in Schedule IF. I have to file ITR 3 by can I skip compulsory audit punishment?
3. If I opt out of 44AD in FY 23-24 I will get accounts maintained and audited. Compulsory Audit now for next 5 years also. Say in FY 24-25, I have salary income, long and short term capital Gain and renumeration for being a partner in partnership firm. As this renumeration is taken as expense in partnership firm it will be taxable in my hands. I have to file ITR 3 and hence have to go for compulsory audit?
2. If I opt out of 44AD in FY 23-24 I will get accounts maintained and audited. Compulsory Audit now for next 5 years also. Say in FY 24-25, I have salary income, long and short term capital Gain and profit for being a partner in partnership firm. As this profit is already taxed in partnership firm it will be exempt in my hands and shown in Schedule IF. I have to file ITR 3 by can I skip compulsory audit punishment?
3. If I opt out of 44AD in FY 23-24 I will get accounts maintained and audited. Compulsory Audit now for next 5 years also. Say in FY 24-25, I have salary income, long and short term capital Gain and renumeration for being a partner in partnership firm. As this renumeration is taken as expense in partnership firm it will be taxable in my hands. I have to file ITR 3 and hence have to go for compulsory audit?
14 July 2024
No tax audit in all above three cases.
18 July 2024
FY 12-13 -> 44AD
FY 13-14 -> 44AD
FY 14-15 -> NO BUSINESS INCOME -> NO 44AD
FY 15-16 -> NO BUSINESS INCOME -> NO 44AD
FY 16-17 -> NO BUSINESS INCOME -> NO 44AD
FY 17-18 -> 44AD
FY 18-19 -> NO BUSINESS INCOME -> NO 44AD
FY 19-20 -> NO BUSINESS INCOME -> NO 44AD
FY 20-21
Turnover Less than 1 CR
Profit - 10%
NO 44 AD
NO AUDIT
FY 21-22 -> NO BUSINESS INCOME -> NO 44AD
FY 22-23 -> 44AD
Queries :
1. How is 5 Years calculated for availing 44AD after entering it into first time ?
2.1 As per above data, 44AD entry is FY 12-13, years in which business income is not there are also counted as continued years of 44AD, so does that mean, I could exit 44AD in FY 17-18 without punishment, but re-entered it in FY 17-18?
OR
2.2 As per above data, 44AD entry is FY 12-13, years in which business income is not there are also counted as continued years of 44AD, so does that mean, I could exit 44AD in FY 17-18 without punishment, but continued it in FY 17-18 and not re-entered it?
3. In FY 20-21, the actual profit was 10% and turnover was less than 1 CR. So no audit was required and profit was greater than 6% of 44AD. Thus this means I exited 44AD in FY 20-21
Or was simply not eligible to take it?
4.1 First Entry in 44AD is FY 12-13. 5 Years from that is FY 16-17. Means 5 Year Criteria finished in FY 16-17.
Now, Entry again in FY 17-18, 5 Years from that is FY 21-22. Means 5 year criteria finished in FY 21-22.
Re Enter in FY 22-23.
OR
4.2 First Entry in 44AD is FY 12-13. 5 Years from that is FY 16-17. Punishment free after FY 16-17. Can now continue without punishment till first exit. First exit in FY 20-21.
Re Enter in FY 22-23.
Thanks in Advance.
FY 13-14 -> 44AD
FY 14-15 -> NO BUSINESS INCOME -> NO 44AD
FY 15-16 -> NO BUSINESS INCOME -> NO 44AD
FY 16-17 -> NO BUSINESS INCOME -> NO 44AD
FY 17-18 -> 44AD
FY 18-19 -> NO BUSINESS INCOME -> NO 44AD
FY 19-20 -> NO BUSINESS INCOME -> NO 44AD
FY 20-21
Turnover Less than 1 CR
Profit - 10%
NO 44 AD
NO AUDIT
FY 21-22 -> NO BUSINESS INCOME -> NO 44AD
FY 22-23 -> 44AD
Queries :
1. How is 5 Years calculated for availing 44AD after entering it into first time ?
2.1 As per above data, 44AD entry is FY 12-13, years in which business income is not there are also counted as continued years of 44AD, so does that mean, I could exit 44AD in FY 17-18 without punishment, but re-entered it in FY 17-18?
OR
2.2 As per above data, 44AD entry is FY 12-13, years in which business income is not there are also counted as continued years of 44AD, so does that mean, I could exit 44AD in FY 17-18 without punishment, but continued it in FY 17-18 and not re-entered it?
3. In FY 20-21, the actual profit was 10% and turnover was less than 1 CR. So no audit was required and profit was greater than 6% of 44AD. Thus this means I exited 44AD in FY 20-21
Or was simply not eligible to take it?
4.1 First Entry in 44AD is FY 12-13. 5 Years from that is FY 16-17. Means 5 Year Criteria finished in FY 16-17.
Now, Entry again in FY 17-18, 5 Years from that is FY 21-22. Means 5 year criteria finished in FY 21-22.
Re Enter in FY 22-23.
OR
4.2 First Entry in 44AD is FY 12-13. 5 Years from that is FY 16-17. Punishment free after FY 16-17. Can now continue without punishment till first exit. First exit in FY 20-21.
Re Enter in FY 22-23.
Thanks in Advance.
18 July 2024
1. & 2. The rule was not applicable.
3. No. you remained in the rule.
4. Entered in FY 17-18 first time after the rule applied.. Remained till FY 22-23. To be finished in FY 2023-24.
5. If no business --- No question of opting out.
3. No. you remained in the rule.
4. Entered in FY 17-18 first time after the rule applied.. Remained till FY 22-23. To be finished in FY 2023-24.
5. If no business --- No question of opting out.
18 July 2024
Thank you for your prompt reply sir.
44AD(4) w.e.f from 01/04/2017 means FY 17-18.
1. I entered 44AD in FY 17-18 itself, had to be in 44AD till FY 21-22 to avoid punishment i.e. 5 years. Have followed the correct rules even in FY 20-21. Again took 44AD in FY 22-23. So, can I now exit 44AD in FY 23-24 without implication of 44AD(4)?
2. Main confusion is the first criteria of 5 years of continuation with 44AD. Suppose, one has taken 44AD in FY 17-18, he has to be in for 5 years means till FY 21-22.
2.1. If he takes it again in FY 22-23, so do the 5 years again start from FY 22-23.
OR
2.2. Once a person surpasses 5 years from initial entry of 44AD, he is free from punishment and can exit 44AD at any year after completion of 5 years and no implication of 44AD(4) will fall on him.
3. If (1) is correct, For FY 23-24, I have a F&O turnover of approximately Rs. 26.5 Lakhs and a net profit of Rs. 36,000 which is less than 6%. As turnover is less than 1 CR, am I exempt from audit as well as 44AD ?
Do I have to maintain books as per 44AA as turnover is greater than 25 lakhs?
4. This is other than the above problem, supposedly someone exits 44AD in FY 18-19, does the time before FY 17-18 before 44AD(4) came into picture, also taken into consideration for counting 5 years of availing 44AD ?
44AD(4) w.e.f from 01/04/2017 means FY 17-18.
1. I entered 44AD in FY 17-18 itself, had to be in 44AD till FY 21-22 to avoid punishment i.e. 5 years. Have followed the correct rules even in FY 20-21. Again took 44AD in FY 22-23. So, can I now exit 44AD in FY 23-24 without implication of 44AD(4)?
2. Main confusion is the first criteria of 5 years of continuation with 44AD. Suppose, one has taken 44AD in FY 17-18, he has to be in for 5 years means till FY 21-22.
2.1. If he takes it again in FY 22-23, so do the 5 years again start from FY 22-23.
OR
2.2. Once a person surpasses 5 years from initial entry of 44AD, he is free from punishment and can exit 44AD at any year after completion of 5 years and no implication of 44AD(4) will fall on him.
3. If (1) is correct, For FY 23-24, I have a F&O turnover of approximately Rs. 26.5 Lakhs and a net profit of Rs. 36,000 which is less than 6%. As turnover is less than 1 CR, am I exempt from audit as well as 44AD ?
Do I have to maintain books as per 44AA as turnover is greater than 25 lakhs?
4. This is other than the above problem, supposedly someone exits 44AD in FY 18-19, does the time before FY 17-18 before 44AD(4) came into picture, also taken into consideration for counting 5 years of availing 44AD ?
19 July 2024
1. Criteria is NEXT five years so continue till FY 2023.24
2. Option 2.2 is correct.
3. Correct for FY 2024.25 or after that. YES
4. No.
2. Option 2.2 is correct.
3. Correct for FY 2024.25 or after that. YES
4. No.
19 July 2024
Sir but in regard to Point 1.
“ Where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and the declares profit for any of the 5 assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section(1).”
- From this I can infer, 5 assessment years succeeding the previous year, means the assessment year of the previous year where the person has first entered 44AD will also count.
- So, If I enter 44AD in FY 17-18, then next 5 assessment years i.e AY 18-19 to AY 22-23.
- Means I can exit without punishment in FY 22-23 (AY 23-24) or any year after that.
Please advice.
“ Where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and the declares profit for any of the 5 assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section(1).”
- From this I can infer, 5 assessment years succeeding the previous year, means the assessment year of the previous year where the person has first entered 44AD will also count.
- So, If I enter 44AD in FY 17-18, then next 5 assessment years i.e AY 18-19 to AY 22-23.
- Means I can exit without punishment in FY 22-23 (AY 23-24) or any year after that.
Please advice.
19 July 2024
Read point 4 ...
https://www.taxmann.com/post/blog/understanding-the-presumptive-tax-regime-u/s-44ad-for-eligible-businesses/
https://www.taxmann.com/post/blog/understanding-the-presumptive-tax-regime-u/s-44ad-for-eligible-businesses/
19 July 2024
“Then in any of the next 5 assessment years relevant to the previous year succeeding such previous year”
- Maybe this is the key, 5 assessment years succeeding previous year means not counting the previous year when first 44AD was opted.
- So, If I enter 44AD in FY 17-18 (AY 18-19), then I have to continue for next 5 assessments years I.e AY 19-20 to AY 23-24.
- Means I can exit 44AD in FY 23-24 (AY 24-25) without punishment.
- Maybe this is the key, 5 assessment years succeeding previous year means not counting the previous year when first 44AD was opted.
- So, If I enter 44AD in FY 17-18 (AY 18-19), then I have to continue for next 5 assessments years I.e AY 19-20 to AY 23-24.
- Means I can exit 44AD in FY 23-24 (AY 24-25) without punishment.
19 July 2024
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25 August 2024
As replied earlier.
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