Section 44AB of Income Tax Act, 1961 with latest amendments
Section 44AB of Income Tax Act, 1961 was Inserted w.e.f 1.4.1985 (AY 1985-86) and further amendments were made from time to time. At present section exists 44AB as under for the AY 2022-23.
Audit of accounts of certain persons carrying on business or profession.
Section 44AB of the Income tax Act, 1961
Every person
(a) Carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceeds, one crore rupees (w.e.f AY 2013-14) in any previous year shall get his accounts audited by a chartered Accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such Chartered Accountant and setting forth such particulars as may be prescribed.
In the following circumstances the figure of rupees one crore is substituted by ten crore rupees.
[Provided that in the case of a person whose—
(a) aggregate of all amounts received including amount received for sales, turnover or gross receipts during the previous year, in cash, does not exceed five per cent of the said amount; and
(b) Aggregate of all payments made including amount incurred for expenditure, in cash, during the previous year does not exceed five per cent of the said payment,
this clause shall have effect as if for the words “one crore rupees”, the words ” [ten] crore rupees” had been substituted:]
[Provided further that for the purposes of this clause, the payment or receipt, as the case may be, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the payment or receipt, as the case may be, in cash; or]
For a person who carries on profession shall get the accounts audited if
(b) carrying on profession shall, if his gross receipts in profession exceed fifty lakh rupees in any previous year; or
If the profit is shown lower than the profits as per section 44AE, 44BB, 44BBB shall get the accounts audited
(c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AEor section 44BB or section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or
If income exceeds the exemption limit and assessee has shown less profit as per section 44ADA shall get the accounts audited
(d) carrying on the profession shall, if the profits and gains from the profession are deemed to be the profits and gains of such person under section 44ADAand he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his profession and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year; or
If the income exceeds the exemption limit and the provision of sub section 4 of section 44AD are applicable shall get the accounts audited
(e) carrying on the business shall, if the provisions of sub-section (4) of section 44ADare applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,
Section 44AD sub section (4) is as under:
“where an eligible assesse declares profit for any previous year in accordance with the provisions of this section and declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of the section five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1).”
If the turnover does not exceeds two crore rupees and profit is declared as per section 44AD(1) then he is not required to get the books audited
Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year:
Section 44AB is not applicable as per the following proviso
Provided further that this section shall not apply to the person, who derives income of the nature referred to in section 44B or section 44BBA, on and from the 1st day of April, 1985 or, as the case may be, the date on which the relevant section came into force, whichever is later :
The following proviso says if books are audited as required under any other law, an audit report is submitted as required under such other law, a further report on the basis of same books audited as required under other law shall be submitted by Chartered Accountant as required under this section of Income Tax
Provided also that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and furnishes by that date the report of the audit as required under such other law and a further report by an accountant in the form prescribed under this section.
Explanation.—for the purposes of this section,—
(i) “Accountant” shall have the same meaning as in the Explanation below sub-section (2) of section 288;
Accountant means a Chartered Accountant
(ii) “Specified date“, in relation to the accounts of the assessee of the previous year relevant to an assessment year, means [date one month prior to] the due date for furnishing the return of income under sub-section (1) of section 139.
Before one month for filing the return u/s 139(1) where books are required to be audited; the report of audit by a Chartered Accountant shall be submitted electronically.
A brief summary is as under:
If turnover of the assessee is equal to or less than 1 crore
If the sales / turnover / Gross receipts is less than or equal to 1 crore and he/she is not showing profit as per section (1) of section 44AD and is less than 8% of the sales, then he/she is not required to get his/her accounts audited as per section 44AB(a) of this act but he/she is required to maintain books of accounts and shall submit his/her balance sheet with the department but if he/she shows his/her profit as per section 44AD(1) then he/she is not required to maintain books of accounts and shall not be filling his/her balance sheet with the department though he/she is required to justify his/her turnover which is equal to or less than 1 crore .
If the income is less than or equal to two crores but exceeds 1 crore
In this scenario if he/she shows his /her profit as per section 44AD(1) of the act as per proviso to section 44AB of the act then he/she is not required to get his/her accounts audited but if his/her turnover does not exceeds 2 crores and his/her profit is less than as per section 44AD(1) then he/she will be required to get his /her accounts audited .
If his/her turnover exceeds two crores and profit shown is more than as required u/s 44AD even in that case he/she is required to get his/her accounts audited u/s 44AB of the act.
If the turnover of the assessee is not exceeding ten crore rupees then there is proviso to section 44AB(a)
From Assessment year 2020-21 if his/her receipts and payments in cash does not exceed 5 percent of the amount respectively then he/she is not required to get his/her accounts audited but he/she has to maintain books and submit a balances sheet with the department.
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The author can be reached at skjain1147@gmail.com
Disclaimer: The author is not responsible for any damages if caused due to mistake or not following the provisions strictly in the proceedings with any authority or court. This is just academic in nature and purpose. Author has tried to brief and explain the confusion for audit of books among some professionals.
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