Return filing U/s. 44AD and switching back to maintaining Books of Accounts

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A business owner previously filed under Section 44AD but now wishes to switch back to maintaining normal books of accounts due to increased turnover and lower actual profit. The discussion clarifies that this is possible, but it makes a tax audit applicable. This is due to opting out of the presumptive taxation scheme under 44AD when the actual profit falls below the presumptive rate.

DIVYESH JAIN

DIVYESH JAIN (Querist)
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26 August 2023 Dear Sir,

I was filing a return U/s. 44AD from A.Y. 2020-21 where turnover was Rs. 20 lacs and showing profit as 8% . Now for A.Y. 2023-24 his turnover has increased to 1 cr and actual profit is coming to Rs. 5 lacs after adjusting all expenses.

I want to know can I switch back to preparing normal books of accounts and show profit of Rs. 5 lacs as selecting 44AD for filing return will result in higher profit.

Please help me in this matter.

Regards,
Divyesh Jain