Can 44ADA be used intermittently or is 5 year use compulsory?

CA. Sourav Sarkar (Chartered Accountant ) (24578 Points)
Replied 25 March 2021

44ADA is presumptive taxation for professional income and if you opts for such presumptive income then that should be maintained for 5 years compulsorily

Naveen (student) (334 Points)
Replied 25 March 2021

As far as I know there is no such restriction for 44ADA. It is applicable only to 44AD because Sec 44AD(4) clearly specifies that if any person opts out of 44AD in any year then he can't claim 44AD benefit for subsequent 5 years. There is no such Clause in 44ADA.

So Crux is 5 yrs rule applies to 44AD. We are free to choose 44ADA as we wish

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NaviN (Consultant) (120 Points)
Replied 25 March 2021

Naveen and Sourav: Thanks, but I was asking where I can find official information that mentions that 44ADA can be used intermittently. Perhaps you could link to the relevant page on the incometax website? I already did a bit of searching and could not find it. This is why I asked the question here.

Naveen (student) (334 Points)
Replied 25 March 2021

No where u can find the explicit words that 5 yrs rule is not applicable to 44ADA. We can only interpret the sections. If u want, u can read these sections in bare income tax act, 1961. I think that's the only source.

I'm not able to attach the PDF of those sections here. If PDFs of the sections is enough for u, mention ur mail id either here or send a private message. I will forward it to u

NaviN (Consultant) (120 Points)
Replied 25 March 2021

That's exactly my point. 44AD mentions "(4) Where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five 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)".

But 44AD also mentions: "(6) The provisions of this section, notwithstanding anything contained in the foregoing provisions, shall not apply to — (i) a person carrying on profession as referred to in sub-section (1) of Section 44AA;".

The 5 year restriction does not apply to 44AA (professionals maintaining books of accounts). But if it is 44ADA (professionals who don't have to maintain books of accounts), no such thing is mentioned. So is it safe to assume that if 44AA does not have the 5 year restriction, then 44ADA also does not have the restriction, even though it is not mentioned?

Naveen (student) (334 Points)
Replied 25 March 2021

Yes u can assume safely. If income tax department want 5 years restriction provision in 44ADA, like in 44AD, there is nothing stopping them from putting it in 44ADA. There was a logic behind adding the 5 yrs provision in 44AD in Finance act 2016. If they wanted, they would have added in 44ADA in the same act or any of the subsequent acts.

Apart from this, Practically I myself doing this 44ADA stuff without continution in many files during my CA articleship and now in own practice. Don't worry. 5 yrs rules doesn't apply to 44ADA.

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NaviN (Consultant) (120 Points)
Replied 27 July 2022

Thanks Naveen. I think you are right. In the income tax website, there is a tutorial which mentions the 5 year compulsion for 44AD, but not for 44ADA.