Answer: Option C ✓
Part 1 — Should he have filed the return? No obligation. His income (6% of ₹58L = ₹3.48L) is below exemption limit, so no need to file. Simple.
(Option D’s “₹50L = must file” is wrong — that’s for tax audit, not filing.)
Part 2 — Can he just walk out of 44AD? 🚨 The real trap.
Yes he can exit — but there’s a 5-year lock-out penalty.
Opted IN → A.Y. 2025-26 Opts OUT → A.Y. 2026-27 Can re-enter only from → A.Y. 2032-33
Many students think the 5 years count from when you opted in — wrong. It counts from when you opt out. That’s exactly what Option D gets wrong.
One liner to remember: “You can leave 44AD anytime, but you can’t come back for 5 years.” 🔒