Discontinuation of 44AD

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Suraj (Querist)
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27 July 2025 Dear Sir / Madam,

My question is as follows:
Mr. A is a GST-registered dealer providing gaming services. He reported his income u/s 44 AD for AY 2023-24 & AY 2024-25.

In AY 2025-26, he suffered a loss of Rs. 450000/- and doesn't want to continue u/s 44AD. His other income includes Interest income of Rs 12563/- and no other income.

1) Can he opt out of section 44AD and report his P&L Balance sheet and claim a loss of Rs. 450000/-?
2) Will he be liable to tax audit if he opts out of presumptive taxation?

Please guide
Regards,
Suraj

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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27 July 2025 If a taxpayer opts out of the presumptive taxation scheme under Section 44AD before completing the mandatory 5-year period, the key consequences are:
The taxpayer will be barred from rejoining the Section 44AD scheme for the next 5 assessment years following the year of opting out.
During this 5-year lockout period, the taxpayer must file under the regular tax regime (such as ITR-3), and is required to maintain books of accounts for the business.
If the taxpayer's income exceeds the basic exemption limit during these years, they may also be liable for a tax audit as per Section 44AB.
For current AY he is not required to file audit report as income doesn't exceed basic exemption limit; but the same rule apply for next five years.

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