[FAQs] Tax Audit Requirements – Section 44AB | Presumptive Taxation | Key Forms – A.Y. 2024-25
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- Last Updated on 9 September, 2024
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A tax audit is an examination of a taxpayer's financial records and statements to ensure that they comply with the Income-tax Act's provisions and generally accepted accounting principles. Conducted by a qualified Chartered Accountant, a tax audit verifies whether the books of accounts are maintained accurately and reflect the true income of the taxpayer. The primary purposes of a tax audit are to ensure proper record-keeping, detect and prevent fraudulent activities, and assist tax authorities in assessing the total income and tax liabilities of the taxpayer accurately. However, undergoing a tax audit does not exempt the taxpayer from additional scrutiny assessments or disallowances of expenses by the tax authorities. The audit's requirements, conditions, and the need for specific forms, like Form 3CA, 3CB, and 3CD, are detailed under Section 44AB of the Income-tax Act, which outlines the thresholds and circumstances under which a tax audit is mandatory.
FAQ 1. What is a Tax Audit?
A tax audit is an examination to ensure that a taxpayer’s financial records accurately adhere to generally accepted accounting principles and the Income-tax Act’s requirements. This process helps verify that all records are properly maintained and accurately reflect the taxpayer’s actual income. It also aids in detecting any fraudulent activities. However, undergoing a tax audit does not protect the assessee from further scrutiny assessments or potential disallowances of expenses1. Only a practising Chartered Accountant can conduct a tax audit.
FAQ 2. What Forms are Required for the Tax Audit Report?
The tax audit report must be submitted using the forms specified below:
| Category of Taxpayer | Form for Audit Report | Annexure to Audit Report |
| Books of account are audited under another law | Form 3CA | Form 3CD |
| All other cases | Form 3CB | Form 3CD |
Forms 3CA and 3CB serve as the audit report formats. Form 3CD is a detailed statement of particulars required under Section 44AB of the Income-tax Act, which must be attached to either Form 3CA or Form 3CB.
If the assessee’s books of accounts are subject to audit under any other law, it suffices to conduct the audit as per that law and submit both the audit report and the statement of particulars (Form 3CD) prepared by a Chartered Accountant. These documents should be furnished by the specified due date.
FAQ 3. Who Must Have Their Books of Accounts Audited?
Section 44AB mandates the audit of books for any assessee engaged in business or profession under certain conditions outlined below:
| Nature of Business or Profession | Category of Taxpayer | When is the Audit Mandatory? |
| Any professions (specified or non-specified) | Any | If gross receipts from the profession during the relevant previous year exceed Rs. 50 lakhs. |
| Business | Both payment and receipt in cash do not exceed 5% of the total receipts and payment, respectively. | If total sales, turnover or gross receipt from the business during the previous year exceeds Rs. 10 crores. |
| Either payment or receipt in cash exceeds 5% of the total receipts and payment, respectively. | If total sales, turnover or gross receipt from the business during the previous year:
|
|
| Businesses eligible for presumptive tax scheme under Section 44AD | Resident Individual or HUF | If the assessee’s income exceeds the maximum exemption limit and he has opted for the scheme in any of the last five previous years but does not opt for the same in the current year. |
| Businesses eligible for presumptive tax scheme under Section 44AD | Resident Partnership Firm (Excluding LLP) | The taxpayer has opted for the scheme in any of the last five previous years but does not opt for the same in the current year. |
| Profession eligible for presumptive tax scheme under Section 44ADA | Resident Individual or partnership firm (Excluding LLP) | The taxpayer claims that profits from the profession are lower than the profits computed under Section 44ADA, and the total income exceeds the maximum exemption limit. |
| Businesses eligible for presumptive tax scheme under Section 44AE | Any Assessee engaged in plying, hiring or leasing of goods carriage | The taxpayer claims that the profits from the business are lower than the profit computed under Section 44AE. |
| Businesses eligible for presumptive tax scheme under Section 44BB | Non-resident assessee engaged in the exploration of mineral oil | The taxpayer claims that his profits from the business are lower than the profit computed under Section 44BB. |
| Businesses eligible for presumptive tax scheme under Section 44BBB | Foreign Co. engaged in civil construction | The taxpayer claims that his profits from the business are lower than the profit computed under Section 44BBB. |
Tax audit provisions under Section 44AB do not apply to assessees covered by Section 44B, Section 44BBA, or Section 44BBC (effective from Assessment Year 2025-26).
provisions under Section 44AB do not apply to assessees covered by Section 44B, Section 44BBA, or Section 44BBC (effective from Assessment Year 2025-26).
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For More Details, Visit Taxmann.com/Practice |
FAQ 4. Is a Tax Audit Required If Turnover Exceeds the Specified Limit But Total Income Is Below the Maximum Exemption Limit?
Yes, a tax audit is required regardless of total income levels. Section 44AB mandates a tax audit even if the assessee’s total income does not exceed the maximum exemption limit. The purpose of a tax audit under Section 44AB is to aid the Assessing Officer in accurately determining the total income of an assessee according to the provisions of the Act. Thus, if turnover exceeds the specified limits outlined in Section 44AB, a tax audit is obligatory, even if the total income falls below the exemption threshold.
FAQ 5. Are Non-Residents Conducting Business in India Required to Get Their Accounts Audited Under Section 44AB?
Section 44AB applies uniformly to both residents and non-residents. A non-resident is required to have their accounts audited if their turnover, sales, or gross receipts within India exceed the prescribed thresholds. The audit for a non-resident will focus solely on the business activities conducted within India.
FAQ 6. How Can You Qualify for the Enhanced Tax Audit Limit of Rs. 10 Crores?
To qualify for the enhanced tax audit threshold of Rs. 10 crores, a business must primarily conduct transactions through banking channels. Specifically, both cash receipts and cash payments during the financial year must not exceed 5% of total receipts and payments, respectively. This means that over 95% of all transactions should be executed through non-cash methods.
It is important to clarify that any transactions involving a cheque or bank draft, unless made as an ‘account payee only’, are considered cash transactions. This includes transactions using bearer or crossed cheques that are not marked ‘account payee’.
Each condition concerning ‘amounts received’ and ‘payments made’ must be met independently. Failing to meet either condition disqualifies the business from the enhanced limit, meaning the standard audit thresholds apply.
The responsibility to demonstrate eligibility for this higher threshold lies with the taxpayer. If a taxpayer’s cash transactions exceed the 5% limit, they risk a penalty under Section 271B for not auditing their accounts unless they can show a reasonable cause under Section 273B to avoid penalties.
Illustrative Example: Mr A operates a readymade garments trading business. During the financial year 2022-23, he reports a turnover under Rs. 10 crores and the following transactions:
| Particulars | Mode of transaction | |
| Cash (Rs. in lakhs) | Bank (Rs. in lakhs) | |
| Receipts | ||
| Sales | 20 | 480 |
| Advance from customers | 10 | 20 |
| Unsecured loan | 10 | 100 |
| Total receipts | 40 | 600 |
| Payments | ||
| Purchase | 15 | 400 |
| Rent | Nil | 50 |
| Loan repayment | 5 | 50 |
| Total Payments | 20 | 500 |
The turnover of Mr A during the financial year 2022-23 is up to Rs. 10 crores. He shall not be liable for tax audit if his cash receipt and payment during the year do not exceed 5% of the total receipt or payment, as the case may be.
Computation of Percentage of Cash Receipts & Payments:
| Particulars | Total (A) | Cash (B) | % in cash (B/A*100) |
| Receipts | 640 | 40 | 6.25% |
| Payments | 520 | 20 | 3.85% |
Although Mr A’s cash payments are within the permissible limit (under 5%), his cash receipts exceed the 5% threshold at 6.25%. Consequently, Mr A does not qualify for the increased Rs. 10 crore threshold and must undergo a tax audit.
FAQ 7. Are Professionals Eligible for the Enhanced Turnover Limit of Rs. 10 Crore for Tax Audits?
No, professionals do not have access to the enhanced turnover limit of Rs. 10 crores for tax audits. Section 44AB of the Income-tax Act distinguishes between business and profession: clause (a) addresses businesses, while clause (b) refers to professions. The provision that sets the enhanced turnover limit of Rs. 10 crores specifically under clause (a) applies solely to businesses. Therefore, professionals are not entitled to this increased threshold for tax audits.
FAQ 8. Is a Person Opting for the Presumptive Taxation Scheme Under Section 44AD Required to Get His Accounts Audited?
Under the Income Tax Act, Section 44AB sets the criteria for when an assessee must have their accounts audited. One significant exception is for individuals who choose the presumptive taxation scheme under Section 44AD. Here’s a breakdown:
- Exemption from Audit – Individuals opting for the presumptive taxation under Section 44AD are not required to get their books audited, provided their business turnover does not exceed Rs. 2 crores.
- Conditions for Audit:
-
- Clause (e) of Section 44AB – If an individual has opted for the presumptive taxation scheme under Section 44AD in any of the previous five years but decides not to opt for it in the current year, they must have their accounts audited if their total income exceeds the maximum amount not chargeable to tax.
- Clause (a) of Section 44AB – An audit is mandatory if a business’s turnover exceeds Rs. 1 crore. However, this limit increases to Rs. 10 crores if cash receipts and payments constitute no more than 5% of total receipts and payments.
- Overlap of Clauses:
-
- If an assessee is subject to both Clause (a) and Clause (e) of Section 44AB, they must have their books audited. For instance, if the turnover exceeds Rs. 1 crore and cash transactions are below 5%, the assessee is liable for an audit.
This structure clarifies the conditions under which an audit is required, aligning with the exemptions provided by the presumptive taxation scheme under Section 44AD.
Let’s analyse the tax audit requirements for an assessee with different turnover scenarios and their choices regarding the presumptive taxation scheme under Section 44AD.
Example:
If an assessee’s turnover is more than Rs. 1 crore and cash transactions (both payments and receipts) are less than 5% of the total, does this subject them to a tax audit?
Here’s a detailed breakdown in tabular form to clarify:
| Situation | Turnover | Whether Liable for a Tax Audit? |
| Assessee opted for Section 44AD in the last 5 years but not in the current year
|
Up to Rs. 1 crore | No |
| Up to Rs. 2 crores | Yes, if income is more than the maximum amount not chargeable to tax [Section 44AB(e)] | |
| More than Rs. 2 crores but up to Rs. 10 crores and the condition in the Proviso to Section 44AB(a) is complied with [i.e., cash payments and receipts do not exceed 5%] | No | |
| More than Rs. 2 crores but up to Rs. 10 crores and the condition in the Proviso to Section 44AB(a) is not complied with [i.e., cash payments and receipts exceed 5%] | Yes | |
| More than Rs. 10 crores | Yes | |
| Assessee has not opted for Section 44AD in the past five years and is not opting this year either | Up to Rs. 10 crores | No [Proviso to Section 44AB(a)] |
| More than Rs. 10 crores | Yes |
|
For More Details about Section 44AD, Visit Taxmann.com/Practice |
FAQ 9. Does a Salaried Employee Who Trades in Derivatives Need to Undergo a Tax Audit?
Income or losses from trading in futures and options (F&O) are treated as non-speculative business income and are taxable under the head’ Profits and Gains from Business or Profession’, even if these transactions do not involve actual delivery of goods.
To determine whether a tax audit is necessary for a salaried employee engaged in F&O trading, one must first calculate the turnover from these activities. The need for a tax audit depends on this turnover figure. If the total sales, turnover, or gross receipts from trading exceed Rs. 1 crore during the financial year, a tax audit is mandatory. However, this threshold increases to Rs. 10 crores if more than 95% of transactions are conducted through banking channels, meaning cash transactions do not exceed 5% of total transactions.
Example: Mr A, besides earning a salary, has traded in futures and options throughout the year. Below are the details of his transactions:
| Transaction | Buy Value | Sell Value | Realised P&L | Computation of Turnover |
| 1 | 40,00,000 | 50,00,000 | 10,00,000 | 10,00,000 |
| 2 | 60,00,000 | 30,00,000 | (30,00,000) | 30,00,000 |
| 3 | 75,00,000 | 60,00,000 | (15,00,000) | 15,00,000 |
| 4 | 3,20,00,000 | 2,00,00,000 | (1,20,00,000) | 1,20,00,000 |
| 5 | 2,30,00,000 | 1,30,00,000 | 1,00,00,000 | 1,00,00,000 |
| Total | 7,25,00,000 | 4,70,00,000 | (55,00,000) | 2,75,00,000 |
Mr A’s turnover from futures and options (F&O) trading amounts to Rs. 2,75,00,000, resulting in a net loss of Rs. 55,00,000. As F&O transactions are typically conducted digitally through banking channels, the higher threshold of Rs. 10 crores for a tax audit is applicable. Consequently, Mr A does not require a tax audit since his business turnover falls below the stipulated limit for the increased threshold.
FAQ 10. What Are the Scenarios Under Which a Tax Audit Is Applicable for Professionals?
Section 44ADA allows professionals to opt for presumptive taxation if their gross receipts do not exceed Rs. 50 lakhs during the relevant previous year. This limit can be increased to Rs. 75 lakhs if cash transactions do not exceed 5% of the total gross receipts for the year.
Here’s a breakdown of when a tax audit is applicable based on different scenarios:
| Case | Gross Receipts | Profit | Whether Tax Audit Applicable? | Reason |
| Case 1
|
Rs. 40 lakhs |
Rs. 25 lakhs |
No |
Gross receipts are less than Rs. 50 lakhs, and profit is more than 50% of the gross receipts. |
| Case 3 |
Rs. 40 lakhs |
Rs. 10 lakhs |
Yes |
Profits are lower than 50% of total gross receipts, and total income exceeds the maximum exemption limit. |
| Case 4 |
Rs. 40 lakhs |
Rs. 2 lakhs |
No |
Although profits are less than 50% of total gross receipts, but the total income is less than the maximum exemption limit. |
| Case 5 (cash received during the previous year exceeds 5% of the total gross receipts) |
Rs. 70 lakhs |
Rs. 50 lakhs |
Yes |
Gross receipts exceed Rs. 50 lakhs. |
| Case 6 (cash received during the previous year does not exceed 5% of the total gross receipts) |
Rs. 70 lakhs |
Rs. 50 lakhs |
No |
Gross receipts are less than Rs. 75 lakhs, and profit is more than 50% of the gross receipts. |
| Case 7 (cash received during the previous year exceeds 5% of the total gross receipts) |
Rs. 80 lakhs |
Rs. 15 lakhs |
Yes |
Gross receipts exceed Rs. 75 lakhs. The profit percentage is irrelevant here. |
FAQ 11. Does the Tax Audit Under Section 44AB Apply to the Business Income of Charitable or Religious Trusts Registered Under Section 12AB?
Charitable and religious institutions are governed by special provisions outlined in Sections 11 to 13 of the Income Tax Act. To claim exemptions under these sections, trusts or institutions must meet certain conditions, including registration, maintaining books of account, undergoing audits, and filing income returns as specified under Section 12A. Once these conditions are met, the income of such institutions is calculated according to Sections 11 and 12, not by the usual commercial principles.
For entities registered under Section 12AB, the income defined under Section 11(1) should be computed following these special provisions rather than the standard provisions of the Act. Specifically, Section 14 and the five heads of income do not apply. The audit requirement under Section 44AB pertains to the ‘Profit & Gain from Business’ head, meaning it is mandated only when the income is assessed under this category or when a tax audit under Section 44AB is explicitly required.
Judicial precedents such as the Delhi Tribunal’s decision in United Educational Society v. Jt. CIT [2019] 107 taxmann.com 127 and the Mumbai Tribunal’s ruling in Asstt. CIT v. India Magnum Fund [2002] 81 ITD 295 have clarified that Section 44AB does not extend to incomes covered under Chapter III, which are excluded from total income calculations. Consequently, charitable institutions whose income computation falls under Sections 11 and 12 are not subjected to tax audits under Section 44AB, unless specified otherwise.
Charitable trusts do undergo specific audits under Section 12A, with audit reports required to be submitted in Forms 10B or 10BB. These sections operate independently of the five heads of income, thus preserving the exemptions granted under Section 12AB. For business operations within these trusts, the ICAI’s “Guidance Note on Tax Audit” advises that if their business turnover exceeds certain thresholds (Rs. 1 crore or Rs. 10 crore in some cases), an audit under Section 44AB is necessary, notwithstanding the exemptions under various subsections of Section 10 and Section 11.
In summary, charitable or religious trusts generally do not require a tax audit under Section 44AB for income processed under Sections 11 and 12, unless their business activities surpass the prescribed turnover limits.
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For More Details about Taxation of Charitable Trusts, Visit Taxmann.com/Practice |
FAQ 12. Who Must Maintain Books of Accounts According to Section 44AA?
Section 44AA of the Income-tax Act mandates the maintenance of books of accounts for various taxpayers. Below is a detailed table illustrating the requirements based on taxpayer categories, income thresholds, and gross turnover or receipts:
|
Nature of Business or Profession |
Category of Taxpayer | Threshold Limits for Income |
Threshold Limits for Gross Turnover or Receipts |
| Specified Professions* | Any |
N/A
|
Mandatory in every case except when presumptive taxation scheme under Sec. 44ADA is opted by the assessee. |
| Non-Specified Professions | Individual or HUF | Rs. 2,50,000 | Rs. 25 lakhs in any 3 years immediately preceding the previous year. |
| Non-Specified Professions | Others | Rs. 1,20,000 | Rs. 10 lakhs in any 3 years immediately preceding the previous year. |
| Business | Individual or HUF | Rs. 2,50,000 | Rs. 25 lakhs in any 3 years immediately preceding the previous year. |
| Business | Others | Rs. 1,20,000 | Rs. 10 lakhs in any 3 years immediately preceding the previous year. |
| Presumptive Tax Scheme under Sec. 44AD | Resident Individual or HUF | Rs. 2,50,000 | Taxpayer opted for the scheme in any of the last 5 previous years but does not opt for it in the current year. |
| Presumptive Tax Scheme under Sec. 44AD | Resident Partnership Firm | N/A | Taxpayer opted for the scheme in any of the last 5 previous years but does not opt for it in the current year. |
| Presumptive tax scheme under Section 44ADA | Resident Assessee | N/A | Taxpayer claims that profits from his profession are lower than those computed under Section 44ADA and total income exceeds the maximum exemption limit. |
| Presumptive Tax Scheme under Sec. 44AE | Any Assessee engaged in plying, hiring, or leasing goods carriage | N/A | Taxpayer claims that his profits are lower than the deemed profits. |
| Presumptive Tax Scheme under Sec. 44BB | Non-resident assessee engaged in the exploration of mineral oil | N/A | Taxpayer claims that his profits are lower than the deemed profits. |
| Presumptive Tax Scheme under Sec. 44BBB | Foreign Co. engaged in civil construction | N/A | Taxpayer claims that his profits are lower than the deemed profits. |
* Meaning of Specified Profession:
- Legal
- Medical
- Engineering
- Architectural
- Technical Consultancy
- Interior decoration
- Film artist2
- Authorised Representative3
- Accountancy Profession
- Company Secretary4
- Information Technology5
** For entities established during the previous year, the applicability of maintaining books of accounts will be determined based on whether the income or gross receipts for the current year are expected to exceed the prescribed thresholds. If not likely to exceed, the maintenance of books is not required.
FAQ 13. What Documents Are Required to Comply with Section 44AA for Maintaining Books of Accounts?
Taxpayers must maintain specific documents to fulfill the requirements of Section 44AA regarding the maintenance of books of accounts. Here’s a breakdown based on the nature of the business or profession and applicable thresholds:
| Nature of Business or Profession | Threshold Limits | Books of Accounts to be maintained |
| Specified Professions other than company secretary and Information technology | Gross receipt exceeds Rs. 1,50,000 in any of 3 years immediately preceding the previous year |
|
| Medical Professions | Gross receipt exceeds Rs. 1,50,000 in any of 3 years immediately preceding the previous year |
|
| Specified Professions | In every case, irrespective of gross receipts and Income | Such books of accounts which may enable the Assessing Officer to compute the taxable income. |
| Non-Specified Professions | Income and turnover do not exceed the threshold limit as specified above | Not required to maintain books of accounts |
| Business | Income and turnover do not exceed the threshold limit as specified above | Not required to maintain books of accounts |
| Non-Specified Professions | Income and turnover exceed the threshold limit as specified above | Such books of accounts which may enable the Assessing Officer to compute the taxable income. |
| Business | Income and turnover exceed the threshold limit as specified above | Such books of accounts which may enable the Assessing Officer to compute the taxable income. |
FAQ 14. Does the Audit Report Need to Include the Addresses of All Locations Where Mr A Maintains Books of Accounts?
According to Clause 11 of Form 3CD, auditors must list all books of accounts and the addresses where they are maintained. If books are kept at multiple locations, the auditor must specify each address along with the corresponding details of the books maintained there. For companies, it’s also important for the auditor to check if Form AOC-5 has been filed with the Registrar of Companies. This form is necessary when books of accounts are held at a place other than the registered office.
Beyond listing the books under Clause 11(b), auditors have the responsibility to thoroughly examine these books. After such examination, they should confirm in Form No. 3CB whether the books maintained qualify as ‘proper books of account’ according to regulatory standards.
- Goodyear India Ltd. v. CIT [2009] 112 Taxman 419 (Delhi)
- Notification: No. SO 17(E), dated 12-1-1977
Film artist includes actor, cameraman, director, music director, art director, dance director, editor, singer, lyricist, story writer, screenplay writer, dialogue writer, and dress designer. - Notification: No. SO 17(E), dated 12-1-1977
‘Authorised Representative’ means a person, who represents any other person, in lieu of fee or remuneration, before any Tribunal or statutory authority, but does not include an employee of the person so represented or a person carrying on legal profession or a person carrying on the profession of accountancy. - Notification: No. SO 2675, dated 25-9-1992
- Notification: No. SO 385(E), dated 4-5-2001
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Whether tax audit u/s 44AB is applicable for the asst. year 2021-22 for an individual assessee whose total turnover is Rs. 2 crores and net taxabale income from business is 1.20 crores and cash receipts is 1.50 crores and cash payments is 50 lakhs?
Yes, since, though his turnover does not exceed the limit of 2 crores in the case of an individual, his receipts and payments exceed 5% of the turnover, therefore tax audit will be applicable.
Assessee has option to opt for presumptive scheme under section 44AD because his turnover is upto 2 Cr. to avoid tax audit.
One person have 2 businesses and one cross 1 crore and other not cross, than audit will be done in both or in one firm and in other firm presumptive audit. It can be Done or not, please suggest
one can opt for presumptive scheme if business is eligible and turnover less than 2 core and for other go for audit.
Hi,
I have business income of Rs. 1 . 5 crores and I’m an individual and i have less than 2 crores turnover and i have more than 5% cash receipts and cash payments. i have paid job work expenses more than Rs. 50 lacs with out deducting TDS iam paying because i have opted for 44AD
Is there any disallownaces for not deducting the TDS??, Is it applicable for 44AD??
and for me Tax Audit is applicable??
one can claim 44AD only till the turnover is up to 2cr, on exceeding the limit of 2cr one can not avail the benefit of sec 44ad, thus normal provisions will be applicable for them where the general limit is 1 cr which extends to 10cr if the cash receipt and payment are up to 5%. For 44AD cases, audit is required only when income lower than presumptive % is declared and such income exceeds the basic exemption level of Rs 2,50,000.00
So turnover being less than 2cr u are eligible for 44ad and assuming that u declare the income as per the presumptive scheme, you don’t need to get your books audited.
further when 44ad is being applied, the tds requirements are relaxed and there is no disallowance
Hiiii
If My Turnover is Upto 2 crore and Cash Receipt Less Than 5%, Can I go For Non Audit Upto 10 Crore Section or I require to Compulsory 44AD Audit , Which option will Be beneficial?
You are not liable to audit upto 10cr if cash receipt and cash payment is <= 5%.
If I not opt for section 44AD till now and also my turnover is not crossing 1 Cr. limit, can I declare my income less than 8% or loss without tax audit u/s 44AB.
no audit even if <8/6
You can declare your income less than 8% or in Loss WIthout tax audit u/s 44ab
I am Salaried Person. I have a Salary Income of Rs. 13 Lakh and F & O Loss of Rs.49000. F & O Turnover is Rs. 11 Lakh. Which ITR need to be file. Is Tax audit applicable? My Last ITR was ITR-2.. Please advice.
Hi Dhaval, Income from trading in derivatives is treated as regular business income. Thus, you have to file ITR-3. Tax Audit will not be available in your case as turnover is not exceeding the limit as prescribed under section 44AB of the Income-tax Act, 1961.
In case where turnover is 8 crs and all in non cash but there is loss. Whether Tax Audit is applicable?
No, If you did not opt 44ad in any of the last 5 previous years.
Hi Krimesh, No, tax audit will not be mandatory.
I am Salaried Person. I have a Salary Income of Rs. 13.5 Lakh and F & O Loss of Rs.1.6L. F & O Turnover is Rs. 7Cr. Which ITR need to be file. Is Tax audit applicable to carry forward losses? Please advice.
Return shall be filed in ITR-3 and tax audit will not be mandatory.
In case where turnover is 5 crs and all in non cash but there is loss. Whether Tax Audit is applicable?
Hi Shalini, tax audit will not be mandatory.
Sir,
I have an F&O turnover of Rs. 3.5crore and a loss of 11 lacs through transactions done completely through FNO banking channels in FY21-22. Will I need to get a tax audit done?
Hi Asad, tax audit will not be mandatory.
Useful article.
It will be more useful if you could kindly clarify the following three things:
1) Is the requirement of tax audit for businesses having below 6% NP on Sales (where 95% receipts/payments are in non-cash) removed now?
2) What constitutes a ‘turnover’ for derivative transactions – since the notional values are huge and cannot be treated as turnover?
3) Are Professionals having gross receipts below Rs50lakhs (eligible for presumptive taxation but not opting for it) require tax audit if they declare less than 50% but more than 6% (all non-cash receipts and payments) of sales as taxable income?
This will be beneficial for many, for sure. Thank you.
All your questions have been answered in the document of Section 44AB on Practice. You may take a 7 days trial to access the document from the following link:
https://www.taxmann.com/practice/Incometax/CompulsoryAuditofAccounts/read/1110000000026734/1/0?cat=read”
MY BUSINESS TURNOVER IS LESS THAN 5 CRORES ANNUALLY, CASH EXP IS LESS THAN 5% AM I APPLICABLE FOR TAX AUDIT.
No tax audit
Hi. Tax audit will not be mandatory if the total sales, turnover or gross receipt from business during the previous year does not exceed Rs. 10 crore and both cash receipt and payment does not exceed 5%.
Is tax audit applicable for AY 2022-23 in the case of F&O Turnover is more than 1cr and loss of 1.5 lakhs and Salary income of 4.5 lakhs?
No, tax audit will not be mandatory.
MY PARTNERSHIP FIRM TURNOVER IS RS.55,00,000/- AND PROFIT IS RS.1,50,000/- AFTER DEDUCTING PARTNERS REMUNERATION AND INTEREST ON CAPITAL RS. 3,50,000/-. IS IT 44AB AUDIT COMPULSARY IN THIS CASE. CAN I FILE WITHOUT CA SIGNATURE WITH BOOKS OF ACCOUNTS .
HI, Tax audit will be mandatory if the firm has opted for the presumptive scheme of Section 44AD in any of the last 5 previous years but does not opt for the same in current year.
If my Business Turnover is less than 2 crore and i opt in 44AD and my F&O turnover exceed 2 Crore did Tax Audit applicable on me ?
Hi, You are not eligible for Section 44AD as total turnover would include the F&O turnover as well.
Proprietorship Turnover 5.2 Crores and net profit in 10 Lakhs only Tax Audit Applicable in this case for the FY 21-22. ( 100% all digital banking Transactions.)
In your case audit turnover limit is 10cr therefor audit is not applicable
Hi, Tax audit will not be mandatory if the total sales, turnover or gross receipt from business during the previous year does not exceed Rs. 10 crore and both cash receipt and payment does not exceed 5%.
Below is info for my case:
Salary: 10 Lakh
turnover in Intraday trading in equity : 13 Lakh
Loss in Intraday trading in equity=1.5 Lakh
Q1: If I file IT return and show 1.5 Lakh in speculative loss under business income ,would I need to do Tax Audit ?
Q2: Do I need to maintain the books of accounts ?
Q3: On the cleartax portal below case requires Tax audit . Is that correct ?
https://cleartax.in/s/tax-audit-section-44ab
Business loss
In case of loss from carrying on of business and not opting for presumptive taxation scheme and Total sales, turnover or gross receipts exceed Rs 1 crore
Hi Suresh, No tax audit will not be mandatory in this case.
AUDIT APPLICABILITY ????
what if:____________ case1_____Case 2___Case 3
1) T/O under 44Ad___1.50cr____1.50cr____1.50cr
2) Normal Business__30lakh___NIL______NIL
__(not opting 44ad)
3) Commission Buss.___NIL____30 lakh___60 Lakh
_____TOTAL________1.80cr____1.80cr_____2.10cr
My annual F&O turnover last year was 66 lacs and I had suffered a loss of 1 lac last year for which I had filed tax return and got it audited. This year my turnover is 1.5 lacs and profit is 30k. I’ve filed my tax returns, should I audit my tax returns by a CA?
Hi Darsh, No tax audit will not be mandatory in this case.
What percentage of profit do i need to declare if tax audit is not applicable ? Since my turnover is 5.5 crore and all transactions are made throgh banking channels.
A cooperative society sold paddy to the WB state govt. for over 1 core(as per market value or so), and as per Govt. contract cooperative society got commissions from govt. for reserve and transportation of paddy, is a tax audit required? or is it mandatory?
HI Antarip, Tax Audit under Section 44AB is required if the business turnover exceeds the prescribed threshold limit. The threshold limit is Rs. 1 Crore. However, the threshold limit shall be Rs. 10 crores if the cash receipt/payments during the year doesn’t exceed 5% of the total receipts/payments.
In your case, the turnover from sale of paddy to government is exceeding Rs. 1 Crore. Further, the amount of commission received from Government for reserve and transportation of paddy shall also be included in the amount of turnover. Thus, tax audit shall be required if the cash receipt/payments during the year exceeds 5% of the total receipts/payments.
I’m Filing ITR of a trust having donation of Rs.39 Lacs for the A.Y. 2022-23, 10B filed, when I’m trying to file the ITR showing error that the 44AB is applicable, Whether 44AB Applicable to a trust?
Hi Abhijith, A trust claiming exemption under Section 11 is required to get its books of accounts audited under Section 12A and not Section 44AB. If you select Section 12A under Audit Information Schedule while filing ITR, the error should not come. The department has recently updated the ITR utility in this respect. Thus, it is advisable to use the latest utility.
If a listed company having turnover of Rs. 3 cr and more than 95% transactions are through bank. Whether they can go without tax audit ?
Hi Rajendra, Tax Audit under Section 44AB is required if the business turnover exceeds the prescribed threshold limit. The threshold limit is Rs. 1 Crore. However, the threshold limit shall be Rs. 10 crores if the cash receipt/payments during the year doesn’t exceed 5% of the total receipts/payments.
As in your case more than 95% transactions are done through banking channel and the turnover is below Rs. 10 crore, tax audit shall not be required.
MY FNO TURNOVER IS 1.98 CRS AND PROFIT OF RS 26 LACS CASH TRANSACTION IS ONLY 2.66 LACSAM I SUBJECT TO TAX AUDIT PLS ADVICE
Hi Ramesh, Tax Audit under Section 44AB is required if the business turnover exceeds the prescribed threshold limit. The threshold limit is Rs. 1 Crore. However, the threshold limit shall be Rs. 10 crores if the cash receipt/payments during the year doesn’t exceed 5% of the total receipts/payments.
As in your case more than 95% transactions are done through banking channel and the turnover is below Rs. 10 crore, tax audit shall not be required.
In my case if assessee is individual and they do tax audit in previous year but in current year they does not exceed the specify limit as per income tax act, 1961 of their turnover, than they have to do there accounts audited in current year also?
Hi Harsh, A person shall be required to get the books of accounts audited if gross turnover or receipts from business or profession during the relevant previous year exceeds the prescribed threshold limit. Thus, tax audit requirement is checked every year. As in your case, the amount of turnover doesn’t exceed the prescribed threshold limit in current year, no tax audit shall be required for that year.
Dear sir,
Pl clarify whether section 44ad is mandatory in nature or optional.
Which section or proviso exempts person from maintaining books of accounts if income declared u/s 44ad because as per 44aa there is no specific exemption for person optin 44ad.
Hi Sir, With regards to the maintenance of books of account, section 44AA provides for the maintenance of books for the person who falls under sub-section (4) to section 44AD. Thus, it can be concluded that the maintenance of books is not required for other persons opting for section 44AD.
For more, you may refer Budget speech of 1992-93 wherein the FM Mr. Manmohan Singh stated that the presumptive taxation scheme is purely optional and such scheme is introduced to avoid the difficulty of maintaining detailed books of account by small shopkeepers & traders.
Our Turnover is less than Rs. 10 Crores and the Net Profit is less than 8% of the Turnover. Our Cash Receipts and Cash Payments are less than 5% of our Turnover. Do we have have to file Tax Audit Rport?
Hi, if your cash receipts and cash payments are less than 5% of the total receipts and payments respectively, then you will be entitled to higher threshold limit of 10crores.. and since turnover is less than 10crores , no tax audit will be required .
But please check that more than 95% of the transactions should be through banking channels and that you have not opted for 44ad in any of the previous 5years.
yes tax audit is mandatory
PARTNERRSHIP FIRM HAVING TURNOVER 7500000 AND NET PROFIT 14500 & NOT OPTED FOR 44AB . AM I ELIGIBLE TO TAX AUDIT
Tax audit is not required as the turnover is not crossing the limit of 1crore.
but books are required to be maintained.
Whether the Tax Audit is Applied for the person who is carrying his first year of Business?
Yes, tax audit is mandatory if the turnover crosses 1crore or 10crore(more than 95% of transactions are through banking channels).
As per Section 44AB a person carrying on a business is required to get its Books of Accounts audited if the total sales or turnover exceeds prescribed threshold limit (Rs. 1 crore or Rs. 10 crore, as the case may be) in any previous year. Therefore, if total sales or turnover of a person carrying on a business exceeds the prescribed threshold limit, irrespective of the fact that it is first year of the business, the tax audit is mandatory.
MY TURNOVER IS 71 LAKHS AND I AM MAINTAINIG BOOKS OF ACCOUNTS HAVING INCOME OF 4.5 L . DO I REQUIRED FOR TAX AUDIT ? WHICH ITR IS TO BE FILED?
No, tax audit is not required as turnover is less than 1crore.
ITR -3 is required to be filed.
“A tax audit under Section 44AB is required if the business turnover exceeds the prescribed threshold limit. The threshold limit is Rs. 1 Crore. However, the threshold limit shall be Rs. 10 crores if the cash receipts/payments during the year don’t exceed 5% of the total receipts/payments. If in your case, more than 95% of transactions are done through banking channels, and the turnover is below Rs. 10 crores, tax audit shall not be required.
ITR-3 can be filed by the individual taxpayer having the turnover less than Rs. 1 crore or 10 crore, as the case may be, and maintaining books of account.”
Turnover Below Rs. 10 Cr. and last two years filed u/s 44AD – can I file current year i.e. Asst, Year 2023-24 u/s 44AD – no Tax Audit ?
Any business carried out by the eligible assessees is eligible u/s 44AD if turnover or gross receipts from such business in the financial year does not exceed Rs. 2 crores. However, the limit of Rs. 2 crores shall be increased to Rs. 3 crores if the amount or aggregate of the amount of cash received during the previous year does not exceed 5% of the total turnover or gross receipts of such year.
Company turnover is Rs. 3 Crores and there is zero cash transaction.
Is tax audit is applicable
“The threshold limit for tax audit u/s 44AB is Rs. 10 Crores if the following conditions are satisfied:
a) Cash receipts, including amount received for sales, turnover or gross receipts, does not exceed 5% of the aggregate amount received during the previous year; and
b) Cash payments, including amount incurred for expenditure, does not exceed 5% of the aggregate amount paid during the previous year.
“
Hi. Turnover of an individual is 9.00 Crore and zero cash transactions in FY 21-22, whether provisions of TDS deduction are applicable to him in FY 22-23
Yes, Provision of TDS shall be applicable.
whether an assessee exempt u/s 10(26) is required to maintain Books of account and get his books audited u/s 44AB if his turnover exceeds the prescribed limit ?
Dear Sir,
Our company Turnover for the F.Y 2021-22 Rs 700.00 Lacs TAX Audit is Compulsory under section -44 AB FORM 3CA, & 3CD is applicable.
Please advice.
A tax audit under Section 44AB is required if the business turnover exceeds the prescribed threshold limit. The threshold limit for tax audit u/s 44AB is Rs. 1 Crore (for businesses) and Rs. 50 Lakhs (for professionals). The limit for businesses will be extended to Rs. 10 crores if the following conditions are satisfied:
a) Cash receipts, including amount received for sales, turnover, or gross receipts, does not exceed 5% of the aggregate amount received during the previous year; and
b) Cash payments, including the amount incurred for expenditure, do not exceed 5% of the aggregate amount paid during the previous year.
If the company satisfies the conditions of the threshold limit of Rs. 10 crores, in this case, tax audit is not required; otherwise, tax audit is required.
Please guide:
A client is having salary income of 12 lakhs
F&O Turnover- Rs. 8.52 lakhs
F&O Losses Rs. 2.80 Lakhs
Not opted presumptive scheme in current previous year and also in any of 5 immediate previous years.
Should he go for tax audit since he incurred Loss in F&O or not?