ONE OF MY CLIENT HAS BEEN FILING HIS INCOME TAX RETURN U/S 44AD, BUT IN F.Y 2018-19 HE COULD NOT FILE HIS INCOME TAX RETURN. MY QUERY IS THAT WHETHER HE IS ELIGIBLE TO FILE HIS F.Y. 2019-20 AND 2020-21 INCOME TAX RETURN U/S 44AD. PL. REPLY. PL. ALSO EXPLAIN THE PROVISIONS OF 44AD(4) IN DETAIL GIVING EXAMPLE IF POSSIBLE. THANKS

Reply—Yes, your client can file his return u/s 44AD. Failure to file ITR for a preceding assessment year will not debar an assessee to file ITR under section 44AD of subsequent year.  

As per section 44AD(4) of Income Tax Act, If a person opts for presumptive taxation scheme then he is also require to follow the same scheme for next 5 years. If he failed to do so, then presumptive taxation scheme will not be available for him for next 5 years.

For example, an assessee claims to be taxed on presumptive basis under Section 44AD for 2021-22. However, for AY 2022-23, he did not opt for presumptive taxation Scheme. In this case, he will not be eligible to claim benefit of presumptive taxation scheme for next five AYs, i.e. from AY 2023-24 to 2027-28.