Critical Analysis of interrelation between Provisions of Section 44AD & Section 44AB along with other ancillary aspects of Income Tax Act, 1961

The provisions of Section 44AD was introduced in the Chapter of Profits & Gains from Business or profession with an objective to reduce the compliance burden of resident small Tax payers. Undoubtedly throughout, the concept related to “Presumptive Taxation Schemes’’ has been very well achieve its objectives.

However, over the period of time these provisions had also gone through series of amendments by various Finance Acts.

Amendments passed by Finance Act, 2017 & Finance Act, 2020 with respect to Section 44AD & 44AB sometimes leads to many misconceptions specifically on those circumstances when Provisions of both sections interrelate to each other & also with the chapter of TDS.

This article is prepared to highlight those misconceptions along with their potential solution as per Existing Law & other ancillary relevant aspects of Income Tax Act, 1961.

Further to enhance the productivity of the article substantially I am going to present it in Frequently Asked Questions & Answer’s format.

Frequently Asked Questions & Answer on Section 44AD

Q 1. Is it mandatory for an “Eligible assessee” engaged in the “Eligible Business’’ whose turnover during the relevant Previous Year doesn’t exceeds the prescribed monetary Limits of Rs 200 Lacs to opt for Section 44AD i.e. Presumptive Taxation Scheme?

Ans – Section 44AD is facility i.e. option available to the assessee it is not mandatory for eligible assessee to opt for Section 44AD.

Q2. An Architect Professional who is covered under section 44AA(1) also engaged in the supply of Cement, concrete etc. & such business is run separately from Specified Profession u/s 44AA.

Can he claimed benefits of both section 44AD & 44ADA assume Gross Receipts from Profession doesn’t exceeds Rs 50 Lacs & Turnover of Cement business doesn’t exceeds Rs 200 Lacs?

Ans – As per Section 44AD (6) the provisions of Section 44AD shall not apply to a person who is a specified professional covered under Section 44AA(1). Th e Proposition that the cement business is runs separately will not altered the situation at all. Since as per Section 44AD(6) such person is ineligible for Section 44AD totally. In the given case the professional can claim the benefits of section 44ADA i.e. too restricted only for Professional Income.

Section 44AD(6) also applicable to the Persons who engaged in the business of agency or earning income which is in the nature of brokerage or Commission. Thus, Stock Broker, Life insurance agents are totally out of purview of Section 44AD. Hence persons covered by section 44AD(6) can’t opt for benefits of Section 44AD in any circumstances.

Q 3. A Partnership Firms engaged in the business of plying, hiring or leasing goods carriage & Turnover of such business doesn’t exceed Rs 2 Cr. Can he opt for benefits of Section 44AD?

Ans – To Claim the benefits of Section 44AD there are twin requirements which have to fulfilled by assessee firstly it must be an eligible & secondly who engaged in eligible business. If any one of the requirement is not fulfilled by the assessee he can’t claimed the benefits of section 44AD.

Explanation to Section 44AD specified the business of plying, hiring of goods etc. mentioned u/s 44AE as ineligible one. Hence despite of the fact that assessee is eligible one but in the given case since it runs ineligible business it can’t claim the benefits of Section 44AD.

Q 4. Assessee is Individual who claim the deductions u/s10A/10AA/10B/10BA or Part C of Chapter VI i.e. Section 80IA/80IB etc. & the turnover of such business doesn’t exceed the prescribed monetary limits of Rs 2 Crores. Can they claim the benefits of Section 44AD?

Ans – As per Explanation to Section 44AD such assessees who claims any of the aforementioned deductions are ineligible to claim the benefits of section 44AD

Q 5. A Firm engaged engage in the business of warehousing as mentioned u/s 35AD & total receipts doesn’t exceeds Rs 200 Lacs. Can he opt for Claim u/s 44AD?

Ans- Yes, the assessee who engaged in the business of warehousing u/s35AD can claim the benefits of Section 44AD. Since restrictions put via explanation to Section 44AD doesn’t apply to Section 35AD business. However, it is interesting to note that such person can’t claim the deductions u/s35AD since section 44AD overrides Section 35AD.

Q 6. Assessee engaged in the manufacturing business can he claims the benefits of Section 44AD provided all other conditions are satisfied?

Ans – Yes, he can claim since no such restrictions is made by Section 44AD.

Q 7. An eligible assessee engaged in the eligible business whose turnover during the previous year 2020-21 was Rs 140 Lacs. He claims the income to be taxed u/s44AD & report 8% of its income under the head PGBP as per Section 44AD(1) while filing the ROI. It is mandatory to gets his accounts audited u/s44AB since his turnover exceeds Rs 1 crore?

Ans – As per Section 44AB(e) so far as the eligible assessee engaged in the eligible business disclosed its profits in accordance with section 44AD(1) he is not under an obligation to gets his accounts audited even if his turnover exceeds by Rs 1 Cr.

Q 8. Individual who engaged in the business of Trading of Grocery items having a turnover of 2.5 crores during the PY ended on 31st March 2021. He is having an opinion that since he is eligible assessee ha can shows profits up to 8% of his turnover & further he is not required to gets his accounts audited u/s44AB. Comment

Ans – In the given case the turnover of the individual exceeds Rs 2 Cr. It is totally out of purview of section 44AD & under an obligation to gets its accounts audited. Since relaxation of section 44AB(e) apply only when assessee declared its profits in accordance with section 44AD(1). In the given case since he can’t claim the benefits of section 44AD(1). He is under an obligation to gets his accounts audited u/s44AB(1).

Q 9. Partnership Firm engaged in the business of Trading of garments having turnover Rs 1.8 Cr during the Assessment Year ended on 31st March 2022. Further firms while filing its ROI claims income more than 8%. Assessing officer while passing the assessment order u/s143(2) impose a penalty u/s271B on failure of gets its accounts audited. AO was in view that since firms claims profits in excess of 8% of its turnover which was not shown in accordance with Section 44AD(1) it had under an obligation to gets its accounts audited u/s44AB(1) because its turnover exceed Rs 1 Cr. Comment.

Ans – The action of the AO is not in accordance with Law. As per Section 44AD(1) a sum equals to 8% of the total turnover etc. or a sum higher than the aforementioned sums claimed to be earned by the eligible assessee shall be deemed to be profits of such business to be chargeable under the head business/profession.

In the given case since firms claims higher sums it means the profits were shown as per Section 44AD(1) & so far as the profits is declared in accordance with Section 44AD(1) relaxation from Tax Audit u/s44AB(e) will be available to assessee.

Q 10. Discuss in details the Provisions of Section 44AD(4) & Section 44AD(5) read with Section 44AB(a) & Section 44AB(e) after assuming the following:

*Assessee claims income lower than the prescribed 8%/6% of turnover in Assessment Year 2021-22

* During Assessment year 17-18 the profits of the firm declared in accordance with section 44AD(1) for the first time.

Ans

  • As per Section 44AD(4) amended vide Finance Act , 2017 where an eligible assessee who declares profits of any previous year in accordance with Section 44AD(1) then he must have to declare profit of next 5 assessment year succeeding such previous year in accordance with section 44AD(1) otherwise assessee is not eligible to opts for Section 44AD(1) for next 5 assessment years succeeding such assessment year in which profit has not been declared in accordance with Section 44AD(1)
  • Further as per Section 44AD(5) where the case of the assessee falls under the provisions of Section 44AD(4) he is subject to Tax Audit in accordance with Section 44AB(e) provided his total income exceeds the maximum amount not chargeable to tax.
  • It is to be noted that if the Turnover of the assessee who is subject to Section 44AD(4) & (5) exceeds the Prescribed monetary limits of Rs 1 Crores then he is liable for the Tax Audit u/s44AB(1) even if its total income doesn’t exceeds maximum amount not chargeable to tax.
  • Finance Act, 2020 inserted two proviso i.e. Proviso (a) and Proviso (b) to section 44AB(1) which increased Tax Audit limits of Rs 1 Cr enhanced to Rs 5 Cr provided the total Receipt and Payment made via cash mode doesn’t exceeds % of total receipt & payments.
  • Hence if an assessee who claims the Income lower than 8% i.e. Section 44AD(4) attracts & whose income doesn’t exceeds maximum amount not chargeable to tax & his turnover exceeds Rs 1 crores & less than 5 Crores but if he could be able to restricts its total receipts & payments both through cash mode upto 5% of total Receipt and payments then he is not liable for Tax Audit u/s44AB(1) since Limits of Rs 1 crore shall be read as Rs 5 crores in those circumstances.
  • If the assessee is a Firm then maximum amount not chargeable to tax shall be Nil. If its case falls under 44AD(4) then firms is liable to Tax Audit u/s44AB(e) provided if it earned any positive income.
  • However, in the case of losses the firm is not required to gets its accounts audited u/s44AB(e) assuming Turnover of firm is less than 1 Cr.
  • If Turnover is more than 1 Cr then even in the case of loss the Firm is subject to Tax Audit u/s44AB(1) & the above limits shall be read as Rs 5 Crores provided other conditions laid down by Finance Act,2020 have been complied with.
  • In Case of Individual/HUF the basic exemption limits is Rs 2,50,000/- & up to Rs 2,50,000/- no tax audit shall require u/s44AB(e) assuming turnover doesn’t exceed the Rs 1/Rs 5 crores as the case may be otherwise Tax Audit shall be required u/s44AB(1).
  • We can make a conclusion with regards to firms that in case section 44AD(4) attracts they are always be subject to Tax Audit u/s44AB provided they earn positive income.
  • Applying the rationale of above provisions following points should be worth noting:

*In the given case assessee opts for Section 44AD for the First time in assessment year 17-18. It means assessee have to declared profits in accordance with Section 44AD(1) i.e. 8% of the turnover or such higher sums for next 5 Assessment year i.e. From AY 2018-19 to AY 2022-23.

* Assessee declare Profits less than 8% i.e. not as per Section 44AD(1) in AY 2021-22 It means firm is not eligible to opts for Section 44AD for Next 5 Assessment Years i.e. From AY 2022-23 to AY 2026-27.

Q.11 An individual/HUF who was subject to Tax Audit u/s44AB(e) in AY 2020-21 since his Total income exceeds maximum amount not chargeable to Tax made the following payments during Assessment year 2021-22

* Rent of building to Mr X – Rs 7,20,000 p.a. (Rs 60,000/- monthly)

Determine the liability to deduct the TDS assuming Turnover of individual/HUF deductor AY 2020-21

* Case A – Rs 75,00,000/-

* Case B – Rs 1,25,00,000/-

Ans- In the Chapter of TDS, individual or HUF while making the payment to any person which is in the nature of Sections 194A/194C/194I/194H/194J are not under an obligation to deduct the TDS provided his turnover in the preceding Financial Year doesn’t exceeds Rs 1 Crores for Business or Rs 50 Lacs for profession. (Amended by Finance Act, 2020)

Hence while determining the liability to deduct TDS one shouldn’t concerned about the Tax Audit status of preceding Financial Year.

Further Section 194IB/194M applicable to only those individual/ HUF who were not under an obligation to deduct the TDS u/s194A/194C/194J/194H/194I & amount paid exceeds the monetary Limits which is Rs 50,000/- per month for Section 194IB.

Both the series of sections are mutually exclusive in nature. In case A since the turnover doesn’t exceed Rs 100 Lacs, Individual/HUF is not liable to deduct the TDS u/s194I. However, since monthly rental exceeds Rs 50,000/- the provisions of 194IB apply & TDS shall be deducted u/s194IB @ 5%.

In Case B since the turnover exceeds Rs 100 Lacs Individual/HUF is under an obligation to deduct the TDS @ 10% u/s194I & Provisions of 194IB will not apply.

Q 12. would the answer case A will change if Monthly rental paid towards Rent of building less than 50,000/- per month

Ans – In such a case no TDS shall require to deduct either u/s194IB and u/s194I since threshold limits of Rs 50,000/- hadn’t crossed.

Q 13. would the answer be change if in case A the rent of building is Rs 51,000/- per month which includes Rs 3,000/- per month towards the usage of furniture

Ans – In that case liability to deduct TDS u/s194IB shall not be attracted even if the total Payments towards the rent exceeds Rs 50,000/- per month. Since the definition of rent includes “Rent means rent towards the usage of Building’’. Composite rent is not contemplated by section 194IB

Q 14. would you answer be remain the same if the rental is paid towards the usage of Machinery in both cases instead of building.

Ans– Section 194IB doesn’t attract towards rental of Machinery. Hence in case A no TDS shall be attracted either u/s194I or u/s194IB. However, in case B since the turnover exceeds Rs 1 Crores individual/HUF is liable to deduct the TDS u/s194I itself only @ 2%.

Q 15. Suppose assessee is a firm whose turnover doesn’t exceeds Rs 1 Crores in AY 2020-21 made the payment of Rent exceeding Rs 50,000/- per month in AY 2021-22. Comment on TDS to be deducted.

Ans – The exemption for not deducting the TDS shall be applicable only for individual/HUF and not on the Firms. Hence, they are liable to deduct the TDS u/s194I provided other conditions of Section 194I apply.

Other Aspects of Section 44AD

  • Since Section 44AD overrides Section 28 to Section 44C thus disallowances u/s40A(3), 40A(2) along with allowances u/s36, 37 etc. shall not be entertain.
  • Held by the Panaji Tribunal in case of Good Luck kinetic vs ITO (2015) that Section 43B being a non-obstante clause have a wide & far amplitude as compare to overriding effect of Section 44AD. Hence, although section 44AD overrides Section 43B also still the scope of disallowances to be made u/s43B is available to revenue.
  • Depreciation will not be allowed to the assessee claiming the benefits of Section 44AD & WDV shall be deemed to be reduced during the period covered by Section 44AD.
  • Despite of the fact, all expenditures u/s28 to 43C shall be disallow still the provisions of Section 201 i.e. provisions for penalty for non- deduction of TDS will be equally applicable.
  • Income from other head of income like Capital Gains, House Property shall be calculated normally & are not subject to limit of 8% or 6% as the case may be.
  • Section 44AD overrides the chapter of PGBP. But Losses are dealt in accordance with Chapter VI which consists of section 70-80. Hence losses from other business head can be set off against income deemed u/s44AD.
  • Assume Total turnover of Partnership Firm for AY 2021-22 is Rs 4 Crores. Out of which 70% sales made on credit basis. Balance 30% received through electronic mode. All the payment made during the previous year made using electronic mode. Analyze

* The Threshold Limits of Tax Audit u/s44AB(1) now enhance upto Rs 5 crores vide Finance Act, 2020 by inserting two provisos in Section 44AB(1)

* As per provisos to 44AB(1) if aggregate of all payments made including amount incurred for expenditures & aggregate of all amount received including amount received during the previous year for sales/turnover/Gross receipts doesn’t exceeds 5% of total payment using cash mode then threshold limits shall be substituted with Rs 5 Crores in place of Rs 1 Crores.

* Its nowhere mentioned that more than 95% of Total Sales & Payment should be made in electronic mode. It simply means, that whatever expenditure is paid in cash & Income is received in cash it shouldn’t exceeds 5% of total amount received and paid during the previous year.

* It means Credit sales and payment due but not paid shall not taken into account for the purpose of identifying the applicability of Proviso (a) & (b) to section 44AB(1)

I am presenting tabular illustrations with the objective to make comprehensive coverage on the applicability of provisions of Tax Audit u/s 44AB for the Assessee who was subject to Provisions of Section 44AD(4) in the Assessment Year 2021-22. Assessee was opted Section 44AD in AY 2020-21 & turnover of AY 2020-21 was Rs 1.80 crores & Profit was shown in accordance with Section 44AD(1) in AY 2020-21.

tabular illustrations

Observation from the above illustrations:

  • Whereever the assessee was subject to Tax Audit solely on the ground of Section 44AB(e) & not in conjunction with Section 44AB(a) it could be observed that the Turnover in all those cases is less than 1 Crore.
  • One fine conclusion that may be drawn that individual or HUF who was subjected to Tax Audit in the preceding Financial Year solely on the ground of Section 44AB(e) they are not under an obligation to deduct the Tax at sources while making the payment under Section 194C/194J/194A/194H/194I.
  • As per above bullet we can also conclude that in such a circumstance the scope of applicability of Section 194IB & 194M will be open provided that other conditions laid down under those respective sections have been complied with.
  • Finance Act, 2020 in order to encourage the Digital Payment systems introduce proviso in Section 44AB(a). However, limits will be increase to Rs 5 crores only when both receipt and payments made more than 95% using electronic modes. The dual requirement may make practically difficult for some organization to obtain the benefits of enhanced limits.
  • Even if the Limits of Tax Audit enhanced for a particular individual/HUF to Rs 5 Crores since he fulfilled all the conditions laid down by Finance Act, 2020. Still for the purpose of TDS Provisions Limit of Rs 100 Lacs shall be taken. In 1st Row of Table although the Tax Audit Limits increased to Rs 5 Crores but individual/HUF is not under an obligation to deduct the TDS in the next Assessment Year under Section 194C/194J/194A/194H/194I. 

*****

Disclaimer: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

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26 Comments

  1. Bhanu says:

    Sir, Please clarify whether maximum amount not chargeable to tax under section 44AB(e), should we consider before rebate under section 87A or after.

  2. Suman says:

    Sir, if an individual has a turnover below 1 cr and his income is above basic exemption limit, and his profit is below 8% of turnover. will he has to be get audited u/s 44ab?. The basic exemption for individual will be 2.5 lacs and not 5 lacs for AY 2020-21, please confirm?

    1. Akash Dhanuka says:

      Hello Mam, the rate of 8%/6% have nothing to do with Section 44AB… Section 44AB simply said if assessee engaged in the business having turnover exceeded by 1 cr he is liable to audit… even if the net result is loss he is still liable to audit… in the given case i am assuming that 44AD(4) doesn’t attract the question of applicability of tax audit will not arise since turnover is below 1 cr… if you adopted section 44Ad earlier & in the next 5 assessment year your net profits is below 8/6% then you are liable to audit us 44AB & that too under clause (e)… Tax Audit have 5 clauses…clause no e will attract only to those assessee who earlier adopted 44AD…

  3. OM PRAKASH SONI says:

    Sir, in the above chart last two row showing turnover of Rs. 2,50,00,000 and Profit of Rs. 5,00,000 Audit requirment under section 44AB(e) – Yes. is it correct?

  4. manognt says:

    Excellent Sir, very well explained. I just want to use your Tabular format with Illustrations for my Clients as a Ready Reckoner. You have saved a lot of time for professionals. Thank you.

  5. CA Aditya Kothari says:

    In case, if an individual who starts a new business in FY 2019 20 will he be subject to audit under section 44AB(e) if his turnover does not exceed 1 cr and he declares profit @5%?

    Further, in next year , assume , his turnover does not exceed 1 cr and this time too he declares profit lesser then 6%/8%.Will the answer change?

    1. CAAkash says:

      Question of applicability of 44AB(e) arise only when the assessee is subject to 44AD(4). for applicability of 44AB(e) there is always two years involved. in the first year you have to show your income as per 44AD(1) i.e. equal to 8/6% & in other year you show income less than 8%/6%…

      if in the first year of adoption of 44AD assessee shows income less than 8/6% then he cant even adopt for 44AD. since as far i remember in the ITR it automatically calcualate the profit portion & you cant change it…

      if case is not fall under 44AD then tax audit will be required to do as per 44AB(1) i.e. turnover of 1 cr or 5 cr… 5%/6%/8% have no role in any case for tax audit

  6. Anirudh Agarwal says:

    Sir,I do business where I make (Purchase)payments thru my credit cards,to enjoy free credit period of 45 days.Annual payment thru credit card(also my total TO) amounts to approx 37 lakh.My sales are in cash which I deposit in current account and pay my card Bills thru this.Now,my question;Is it okay to treat my profit/income as 8% of the turnover,and most important,is it legit to use credit card for my business purchases,as it’s revealed in form 26AS of return,as SFT transactions?Pl Reply

  7. Raja Sekhar says:

    Provisions of Sec.44AD & 44ADA conflict with requirements prescribed U/s 139 (9) (viii).
    In the absence of Books of Accounts as suggested U/s 44AD/ ADA, how the Financial Data required to be furnished U/s139(9) can be filled. In the absence of information the Return cannot be uploaded. Any imaginary figures filled in Say I.T.R.4 may be adversely used by A.O.against the Assessee in subsequent years. Please comment.
    Raja Shekhar

  8. Shrawan says:

    Assessee, who is a CA, providing ca services [(eligible assessee , eligible profession u/s 44ADA(1) ].
    His turnover is less than 50 lacs, he is not filing return u/s 44ada but normal itr3.
    His profit is less than 50% , is tax audit applicable in this case?

    1. CAAkash says:

      No in the given case since he is filing return normally. He is a professional. Ni role of 44ADA is here since he doesnt opt it. Tax Audit is applicable in case of profession in accordance with 44AB(B).
      Clause no a is applicable to business
      Clause no b is applicable to professionals.
      For professional limits of Rs 50 Lacs is applicable.

      to conclude since the professional adopt normal provisions & Turnover doent exceed Rs 50 Lacs he is not required to get his accounts audit.
      even if he report a loss then also he is not required to get his account audited.
      50% limit is applicable only when he opts for 44ADA otherwise not

  9. Aadhi says:

    Sir as per my understanding from the article turnover upto 5 crs sec 44ad opting presumptive scheme declaring profits @ 6% For e payments and 8%for cash mode .cash receipts and payments less than 5% of TTL TO No tax audit required correct if iam wrong slight confusion in ROI 5 LACS TERMS

    1. CAAkash says:

      Mam, As soon as the turnover get exceeded by Rs 2 cr assessee is totally out of the scope of Section 44AD. The limit of Rs 5 Cr is only for Section 44AB i.e. whether tax audit is required to do or not. In no case limit of Rs 5 Cr is applicable for 44AD.

      even if the eligible business who opt for section 44AD & shows his income not less than 8%/6% & received his 100% receipts & made payment 100% using e method then also limit of Section 44AD will be Rs 2 Cr. It will in no case exceeded to Rs 5 cr for the purpose of Section 44AD

  10. Nitin Mahajan says:

    Greetings. Wonderful information.
    An entity eligible for benefits of section 44AD and availing them since beginning had to get books audited for FY 2018-19 as his turnover was above Rs.2Cr during the year.
    Now in FY 2019-20, the turnover has dropped to around 1.5Cr. Can the assessee (individual) claim benefit of section 44AD for AY 2020-21.
    Regards

    1. CAAkash says:

      Yes as per my individual opinion he can opt for 44AD. since restriction of not opt for 44AD for next 5 years is applicable only when section 44AD(e) attracts in any assessment years. assuming section 44AD(e) doesn’t attract he can opts for Section 44AD. Since 44AD(e) doesn’t attracted.

  11. Narendra says:

    If turnover is 2.5 cr and cash receipts and payments are below 5% limit, then there is no need of audit irrespective of profit ratio.

    1. CAAkash says:

      No in such a case assessee is not required to get his accounts audited since limits will be Rs 5 Cr.
      however it is to be noted that Limit of Rs 5 Cr increased only in case of business & not in the case of profession. it is till Rs 50 Lacs.

  12. CA Akshay Shetty says:

    I have a different understanding with respect or applicability of audit under section 44AB.
    1. In case an assessee T.O doesn’t cross 5 cr and he satisfies the condition of cash receipt/payment not exceeding 5% then he shall not be liable for audit at all. He just has to maintain books of account and declare book profit after complying sec 28 to sec 43 of the IT Act.
    2. From the tabular presentation given in the article sec 44AB (e) is presumed to be applicable where profits are declared less than 8/6%. However, sec 44AB (e) applicable only when sec 44AD (4) is applicable and income exceed maximum amount not chargeable to tax. Say for example an individual assessee who has not declared priorly under sec 44AD(1) , and has a turnover less than 1cr can file by maintaining books of account and declare book profit after complying sec 28 to sec 43 of the IT Act.

    1. CAAkash says:

      Respected Sir, First of all i want to say thank you to raise Question.
      1) This article is prepared keeping in mind that Assessee who opted for Section 44AD then in such a case what is applicability of provision of Tax Audit.
      2) The point raise in question 1 is absolutely right in the general circumstances when assessee follows normal provisions of the Act.
      3) For example, Mr A an individual whose turnover is upto Rs 5 cr reciept cash & paymrnt from cash doesn’t exceds by 5% then tax audit is not required at all.
      4) The tabular illustration is prepared in mind that assessee was subject to 44AD(4). It means he doesn’t reported profits as per 44AD(1) i.e. Income is less than 8%/6% i.e. as per 44AD(1)
      5) It meeans they are straightway exposed to tax audit us 44AB(e) provided their income exceed the Maximum amount not chargeable to tax. For firm it is Nil, for individual & HUF it is Rs 2.5 Lacs.
      6) if this is the case of Individual & his income doesnt exceed by Rs 2.5 Lacs then in such a case he is out of the scope of 44AB(e) despite of the fact Section 44AD(4)
      7) Only scope left of tax audit in such a case to apply normal provision of 44AB(a) i.e. turnover specific. in that case if he restrict upto Rs 5 % then limit will be Rs 5 cr otherwise it will be Rs 1 Cr.
      Please correct me if i am wrong & provide your valuable guidance for further improvements.
      Thanking you

  13. VEDPAL SHARMA says:

    For AY 2021-22, if the Total Turnover of Individual is Rs. 3,00,00,000/-, Profit is Rs. 18,00,000/- and Cash Payment & cash Reciept is less than 5%.
    Is tax audit is applicable u/s 44AB ??

    1. CAAkash says:

      Respected Sir, If he follow normal provision of the Act & don’t adopt for presumptive taxation then in such a case no tax audit is required in such a case.
      Even if he is not required to tax audit still he is required to deduct the TDS us 194H/194I/194C/194J/194A since they are now turnover specific.
      Since the turnover is exceed Rs 1 crores & for the chapter of TDS the Limit is not increased to Rs 5 Cr

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