Tax audit – Applicable clause of Section 44AB triggering tax audit

Hello readers – Now days tax audit date approaching so I think relevant clause under which tax audit to be conducted we must know- Clause 8 of 3CD-

Clause 44AB (a) – Every person carrying on business shall get accounts audited if receipts of business exceeding specified limits –

• The limit provided in the clause is Rs. 1 crore, which is converted to Rs. 10 Crs. if aggregate cash receipts and cash payments of business does not exceed 5% of the aggregate cash receipts and cash payments.
• Clause 44AB(b)- Every person carrying on profession shall get accounts audited if Gross receipts in profession exceeding specified limits,If gross receipts in profession exceed Rs.50 lakhs.
• Clause 44AB(c)- i- Every person carrying on business Profits and gains lower than deemed profit u/s 44AE- For any person, engaged in business of plying, hiring or leasing goods carriage not more than ten goods carriage vehicles and declaring less than deemed profits.
• Clause 44AB(c)- ii- Profits and gains lower than deemed profit u/s 44BB – For Non-Resident, engaged in business of exploration of mineral oils and declaring less than deemed profits.
• Clause 44AB(c)- iii- Profits and gains lower than deemed profit u/s 44BBB- For Foreign Company, engaged in business of Turnkey Power Projects and declaring less than deemed profits
• Clause 44AB(d)- Profits and gains lower than deemed profit u/s 44ADA-
• For Individual & firm (other than LLP), if Profits u/s 44ADA claimed to be lower than the presumptive profits and gains and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year.
• Clause 44AB (e) –When provisions of section 44AD(4) are applicable -For Individual, HUF & Firm (other than LLP) If section 44AD(4) is applicable and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year.
• Third proviso to s.44AB – Audited under any other law- A person may be required to get the audit done under any of the above clauses of s. 44AB.

However, where such person is required to get his accounts audited under any other law, then this clause is to be chosen.

• Clause 44AB(a)- Proviso where aggregate cash receipts and cash payments of business exceeds specified limits.The proviso to section 44AB(a) provides that if aggregate cash receipts and cash payments of business does not exceed 5% of the aggregate cash receipts and cash payments, then the limit as given in s. 44AB(a) changes from Rs. 1 Cr to Rs. 10 Crs.

Above stated clauses are very important as tax audit need to be done keeping in mind above stated limits.

Now coming to clause 8A-

Clause 8A has been modified to include if the assessee is exercising the of option u/s 115BAC or 115BAD (two new concessional rates introduced in Finance Act ,2020) with already existing 115BA/115BAA/115BAB for companies.

• Taxpayer being an individual or HUF can go for new option u/s 115BAC when he opts to pay income tax under the new tax regime; wherein there are lower tax rates but does not allow certain deductions and exemptions; or
• Taxpayer being a Resident Co-operative Society can go for new option u/s 115BAD providing a benefit of a lower tax rate of 22% but subject to nonavailing for certain deductions and exemptions and other conditions.

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