Article discusses Applicability of Tax Audit under section 44AB in In a case where a person carries business,In a case where a person carries profession and In a case where person carries business Under Section 44AE / Section 44BB/ Section 44BBB.
Applicability of Tax Audit U/s 44AB
As we all know that the finance act 2017 which is applicable from the previous year 2017-18 has made an amendment in Section 44AB (Tax Audit) by inserting a new proviso which has made the applicability of this section completely different.
So let us discuss the applicability of this section for the purpose of audit for the previous year 2017-18 and subsequent years.
- In a case where a person carries business
The section 44AB(a) says that the person carrying business, would required to get his accounts audited if his Total sales/turnover/gross receipts exceeds Rs. 1 crore in the previous year.
However, the amendment comes from the finance act 2017, says that this section shall not be applicable to the person who declares profit under Section 44AD and has the total sales/turnover/gross receipts less than Rs. 2 crore.
So now the question arises that when a person is required to get his accounts audited. The answer to this question is as under.
- First of all, the person having the T/O less than 1 crore is not required to get his accounts audit.
- Secondly, if the turnover exceeds the limit of Rs.1 crore but up to Rs. 2 crore is having an option to avail the benefit of Section 44AD (1) and avoid the audit, if he don’t want to avail the option of Section 44AD (1), then he required to get his accounts audited.
- Thirdly, the person having the T/O more than Rs.2 crore is required to get his accounts audited.
- In a case where a person carries profession.
The section 44AB(b) says that where a person carries profession is required to get his accounts audited if the gross receipts in the previous year exceeds Rs. 50 lacks.
The section 44AB (d) says that where a person carries profession, declares profit U/S 44ADA, and declares the profit less than the deemed profit and his total income exceeds the limit which is not chargeable to tax, then he requires to get his accounts audited U/s 44AB (d).
However, the amendment comes from the finance act 2017, says that this section shall not be applicable to the person who declares profit U/S 44AD and has the total sales/turnover/gross receipts less than Rs. 2 crore.
So now the question arises that when a person is required to get his accounts audited. The answer to this question is as under.
- First of all, we will check that whether the person opting for section 44ADA or not. If he opts for Section 44ADA then we will apply the Section 44AB (d) and check whether he requires getting his accounts audited or not.
- If he don’t fall U/s 44ADA then we will Apply 44AB (b) and check that whether the gross receipts are more than 50 lacks or not. If gross receipts are less than 50 lacks then audit is not required as the same is not covered U/s 44AB(b)
- If gross receipts are more than 50 lacks but up to 2 crore then he can avail the benefit of Section 44AD(1) and avoid the audit (As per the amendment made by finance act 2017),
- However if the gross receipts exceeds the 2 crore then audit is mandatory.
- In a case where person carries business U/s 44AE / 44BB/ 44BBB
They are required to get their accounts audited if they declare income lower than the deemed income under those section and their income exceeds the maximum amount which is not chargeable to tax. [Section 44AB(c)]
- In a case where person carries business covered U/s 44AD (4) and his income exceeds the maximum amount which is not chargeable to tax is required to get his accounts audited by an accountant.
[Note: Section 44AD (4) says that if a person declares his income U/S 44AD then he is bound to declare his income U/S 44AD for the next five assessments years.
But if he fails to declare his income U/S 44AD in any of the next 5 assessments years then the assessee is not eligible to avail the benefit of Section 44AD(1) for the next 5 assessments year relevant to the previous year in which the assessee fails to opt section 44AD(1) ]
Tax Audit Limit for Business Rs. 2 Crore & for Profession Rs. 50 Lakhs
(Republished with Amendments)
Author Bio
how to calculate tax audit financial limit in case of construction work carried on by contractor ?
whether a person claiming exemption u/s.10(26) required to get its books of account audited u/s.44AB of the IT Act. The assessee is a State owned Development corporation.
Dear sir,
I have read your article on tax audit applicability but I have doubt for one instance which is as under:
The assesse (partnership firm) having business income from construction in previous fy 201617 ia more than 1 crore and gets it account audited under 44AB(a) for ay 201718.
In current year it has Business loss due to non operation of business during previous year 201718.However it has Income from other source and capital gain income worth rs.11 lakhs around and which is crdited to Profit and loss account.accordingly book profit as per pl is 4 lakhs.
In this case,is tax audit applicable for ay 201819 and if yes can you please help me with explanation which section 44ab(e)
Hi Sir ..
12 AA Register Trust – require tax audit report 44 AB .. kindly cofirm.. f.y 2017-18 Grant Received 7.3 Cr.
Partnership firm Having Commission Income (Business commission not professional)= 48 Lakhs and having 1 Lakhs profit then liable for tax audit???
Sir if a doctor who have clinic receipts and hospital professional receipt is approx 1.5 Cr then tax audit is applicable ??
according to chart 44ad(1) can be opt and avoid audit so it means we dont need to file 3cd ?? only itr will be filled ??
my question is if assesse is COMMISSION AGENCT AND PARTNERSHIP FIRM
THE WHAT PROFIT RATIO IS REQUIRED UNDER INCOME TAX ACT, OUR TO IS 1350000/- COMMISSION FOR THE YEAR 2017-18, CAN WE TAKE BENEFITES U/S 40 B INT & REMUNERATION TO PARNTER
Hi sir,
My gross receipts from works contract 6567518 & commission income 2405700 .we have the profit 364036.we required to audit my accounts please help me?????
A PARTNERSHIP FIRM OF PROFESSIONAL ( DOCTORS) DONT WANT TO OPT 44ADA. GROSS RECEIPTS IS BELOW 50 LACS. WANT TO FILE NORMAL RETURN( NOT IN 44ADA) SHOWING PROFIT LESS THAN 8%. TAX AUDIT WILL BE APPLICABLE OR NOT IF SHOW LESS THAN 8% PROFIT BY FILING ITR5.
Hello,
My query is if a partnership firm of professionals (doctor) showing profit less than 50%, whether it has to get its accounts audited? Because u/s 44ADA the Profit is very high. So without opting this scheme we can get the books audited.
In case of profession flow chart , under the yes arrow sign it should be audit required and under no arrow key sign it should be no audit required
Sir, I have an query, in case of partnership firm if a firm is in profit before providing remuneration and interest to partner but after providing remuneration and interest to partner firm is in loss. whether firm is required to tax audit. As in my knowledge audit is required when firm shows profit less than 8% and income exceeds maximum exemption limit. I want to know in case of profit to firm before appropriation but after appropriation there is loss in firm. In that situation what should we consider and whether firm is required to tax audit or not???
Hello Sir,
I want to report losses with turnover of less than 1 crore. I also have salary income of more than 2.5 Lac.
I was going through multiple articles on TaxGuru and came across these two :
https://taxguru.in/income-tax/tax-audit-case-section-44ad-applicable-net-profit-8-6.html
https://taxguru.in/income-tax/tax-audit-turnover-1-crore-net-profit-8.html
Can you please give me your views on them ? Do i need audit ? If yes, is there any way i can avoid it ?
Thanks & Regards,
Ranjan
Dear Sir/Madam
My total turnover in stock trading is below one crore and I have incurred
losses I am not salaried,my Income from other sources and long term capital
gains from mutual funds is well below exemption limit .do I need my account
to be audited which itr form to be filled can I show presumptive income if
i show presumptive income using itr4 then i cant put value of long term
capital gains of mutual fund Please advise as no one has proper answer to
this query and I do regular trading in stock market . Thanks in advance.
Regards
Jitendra gaur
Sir if T/O is 80 lack. i want show profit less then 8% then tax audit is applicable or not.
Sir if Turnover is 80 lack.and i want show profit less then 8%. then tax audit is applicable or not
Loan financing commission agents falls under which category ??
Hi Sir,
Our Turnover in FY 2017-18 was 1.57 Crores. Do we have to get our Books audited us 44AB for FY 2018-19? Thanks in advance.
An individual having turnover less than 1cr from business and business in newly set up i.e its first assessment year for it and claim that profit is less that what 44AD specify .
Will he be required to get accounts audited ?
Sir if my bussiness turnover is 5900000 and my loss is 200000(F y 2016 – 2017)
Tax audit is applicable or not?
professional audit chart not clear.. Have some doubts on 44ADA
Sir photographer are not covered under the profession as under section 44AA therefore are outside the perview of section 44ADA
I think there has been some mistake. How can a professional file return u/s 44AD?
Is the photographer Nd architect falls under the profession u/s 44ADA