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Opting out 44AD audit

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Himanshu Agarwal

Proprietor

142 Points Posted on 22 July 2023

Hello All,
Last year in partnership firm If turnover is 5 lakhs and profit is 50 thousands opted for 44AD.
NOW THIS YEAR if we opt out of 44AD.
IS IT MANDATORY TO GET BOOKS OF ACCOUNTS AUDITED BY CA?
Even turnover IS 10 LAKHS AND PROFIT IS 1 LAKHS BUT DOESN'T WANTED TO CONTINUE IN 44AD

Replies (2)

Quick Summary

If your partnership firm previously opted for Section 44AD and now wishes to opt out, you may be subject to mandatory tax audits, even with a turnover of £10 lakhs. This is particularly the case if you declared profits below the presumptive rates in the previous year, as this can restrict your eligibility for 44AD for five years. To avoid a compulsory audit, ensure you continue declaring profits at or above the 6% or 8% threshold under 44AD.

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

121546 Points Posted on 22 July 2023

No. Tax audit not applicable.

Aashok Kumar Sharma

Finance/Compliance Consultant

77844 Points Posted on 08 November 2026

Firm opted for 44AD last year; now lower profit:

• If the firm declared under 44AD last year (Rs 50,000 on Rs 5 lakh, 10%), and this year declares a profit lower than 6%/8%, it's opting out within 5 years (44AD(4)). It's barred from 44AD for 5 years, and must maintain books and get audited (44AB(e)), since a firm has no basic exemption limit.

• So even small turnover firms face audit if they opt out after opting in.

• To avoid it, continue declaring at least 6%/8% under 44AD.