[FAQs] Introduction & Applicability of Tax Audit | A.Y. 2023-24
- Blog|Tax Audit Week|Account & Audit|
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- Last Updated on 13 September, 2023
FAQ 1. What is a Tax Audit?
A tax audit is a process to verify whether the books of accounts prepared by a taxpayer comply with the generally accepted accounting principles and the provisions of the Income-tax Act. It is intended to ensure that the books of account and other records are properly maintained and correctly compute the taxpayer’s true income. Such an audit also helps in checking fraudulent practices. A tax audit does not give the assessee any immunity from scrutiny assessment disallowance of expenses1. A tax audit can be conducted only by a Chartered Accountant in practice.
Read More Compulsory Audit of Accounts
FAQ 2. In which form the tax audit report has to be obtained?
The tax audit report has to be furnished in the forms prescribed below:
Category of Taxpayer | Form for Audit Report | Annexure to Audit Report |
If the books of account of the assessee are required to be audited under any other law | Form 3CA | Form 3CD |
In any other case | Form 3CB | Form 3CD |
Form No. 3CA/3CB is a format of audit report, whereas Form 3CD is a Statement of particulars required to be furnished under Section 44AB of the Income-tax Act.
If the assessee is required to get his books of accounts audited under any other law, it is sufficient for him to get his accounts audited under that law and furnish a report of such audit and a report in form 3CA and 3CD by a Chartered Accountant by the prescribed due date.
FAQ 3. Who is required to get books of accounts audited?
Section 44AB provides for the audit of books of accounts of an assessee engaged in business or profession. The table below enumerates the requirement to get the books of accounts audited by different taxpayers:
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 exceeds Rs. 1 crore. | |
Business 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 5 previous years but does not opt for the same in the current year. |
Business 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 5 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. |
Business 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. |
Business 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. |
Business 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. |
The provisions for tax audit under Section 44AB are not applicable in the case of an assessee who comes within the purview of Section 44B or Section 44BBA.
FAQ 4. Is a tax audit required if turnover exceeds the specified limit, but total income is below the maximum exemption limit?
Yes, the tax audit is mandatory. Section 44AB does not exempt an assessee from the tax audit simply because its total income does not exceed the maximum exemption limit.
The objective of tax audit under section 44AB is to assist the Assessing Officer in computing the total income of an assessee in accordance with different provisions of the Act. Therefore, even if the total income of a person is below the maximum exemption limit, he will get his accounts audited and furnish the audit report if any condition prescribed under Section 44AB is satisfied.
FAQ 5. Whether a non-resident conducting business shall be subject to audit under Section 44AB?
Section 44AB does not differentiate between residents and non-residents. Therefore, a non-resident assessee must also get his accounts audited if his turnover/sales/gross receipts exceed the prescribed limits. This audit, however, would be confined only to the Indian operations carried out by the non-resident assessee.
FAQ 6. How to avail of the benefit of the enhanced limit of Rs. 10 crores for the tax audit?
The increased threshold limit of Rs. 10 crores shall apply only if cash receipts and cash payments during the year do not exceed 5% of the total receipt or payment, respectively. In other words, more than 95% of business transactions should be done through banking channels. It should be noted that any payment or receipt by cheque drawn on a bank or by a bank draft, not being an account payee cheque or draft, should be considered payment or receipt in cash. For example, any payment or receipt by a bearer or crossed cheque (not an account payee cheque) should be considered as payment or receipt in cash.
It may be noted that conditions in respect of ‘amounts received’ and ‘payments made’ should be fulfilled separately. A threshold limit of 5% is prescribed separately for receipts/payments and should be applied accordingly. It means that if one of the conditions is not satisfied, the enhanced turnover limit will not apply.
The onus would be on the assessee to prove that he is eligible for an increased threshold limit for not getting his accounts audited. He needs to ensure that his aggregate cash receipts and payments are within the limit of 5%. If he fails to do so, the consequences would be a penalty under Section 271B for failure to get accounts audited. However, if there is reasonable cause, then in terms of Section 273B, such a penalty may not be imposed.
For example, Mr A is engaged in the business of trading readymade garments. He has a turnover of less than Rs. 10 crores during the financial year 2022-23. He made the following transactions during the relevant year:
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% |
Though the payment made in cash during the year does not exceed 5% of total payments, the percentage of cash receipts exceeds the limit of 5%. Thus, Mr A is not entitled to the benefit of the increased threshold limit of Rs. 10 crores for the tax audit. Hence, the tax audit is applicable.
FAQ 7. Do the professionals have the enhanced turnover limit of Rs. 10 crore for the tax audit?
Clause (a) of Section 44AB talks about a person carrying on a business, whereas clause (b) talks about a person carrying on a profession. The proviso to Section 44AB providing the enhanced turnover limit of Rs. 10 crores for the tax audit is placed below clause (a) to Section 44AB. Thus, the persons engaged in the profession are not entitled to claim an enhanced turnover limit of Rs. 10 crores for the tax audit.
FAQ 8. Whether a person opting for a presumptive taxation scheme under section 44AD is required to get his accounts audited?
Section 44AB prescribes the conditions under which an assessee is required to get his accounts audited. It excludes a person from getting books of account audited if he opts for a presumptive taxation scheme under Section 44AD, provided the turnover of the business does not exceed Rs. 2 crores.
Clause (e) of Section 44AB states that a person, who has opted for the presumptive taxation scheme under Section 44AD in any of the last 5 previous years but does not opt for the same in the current previous year, shall be liable to get his accounts audited if his total income exceeds the maximum amount not chargeable to tax.
Clause (a) of Section 44AB provides for an audit of books of account if a person is engaged in a business and the turnover of such business exceeds Rs. 1 crore. However, the threshold shall be increased to Rs. 10 crores if the cash receipt and payment do not exceed 5% of the total receipt and payment, respectively.
If an assessee is covered under both the clauses, that is, clause (a) and clause (e) of Section 44AB, will he be liable to get the books of account audited?
For example, if the turnover of an assessee is more than Rs. 1 crore and his cash payment and receipt are less than 5%, is he liable for a tax audit?
Let’s understand this with the help of the table below:
Situation* | Turnover | Whether liable for a tax audit? |
The assessee has opted for Section 44AD in any of the last 5 years but is not opting for the same in the current year. | Up to Rs. 1 crore | Yes, if income is more than the maximum amount not chargeable to tax [Section 44AB(e)] |
Up to Rs. 2 crores | ||
More than Rs. 2 crores but up to Rs. 10 crores.
|
No [Proviso to Section 44AB(a)] | |
More than Rs. 10 crores | Yes | |
The assessee has not opted for Section 44AD in any of the last 5 years and is not opting for the same during the current year as well. | Up to Rs. 10 crores | No [Proviso to Section 44AB(a)] |
More than Rs. 10 crores | Yes |
* Assuming cash receipts or payments do not exceed 5% of the aggregate amount received or paid during the year.
It should be noted that Clause 8 of Form 3CD requires the auditor to provide the relevant clause under which the tax audit has been conducted.
In case of companies, Tax Audit Quality Review Board has observed that in Clause 8 tax auditors erroneously select the option “Clause 44AB(a) – Total sales/turnover/gross receipts in business exceeding specified limits” instead of option “Third Proviso to Section 44AB: Audited under any other law”. So in case of companies, one should select from the dropdown in the e-filing utility the option of “Third Proviso to Section 44AB”-Audited under any other law”.
FAQ 9. Is a salaried employee required to get accounts audited if he is also doing trading in derivatives (futures and options)?
The gains or losses arising from trading in F&O are always taxable under the head ‘Profits and Gains from Business or Profession’. Income or loss from dealing in F&O shall be deemed as normal business income (non-speculative business) even though delivery is not affected in such transactions.
To check the applicability of tax audit in such cases, the turnover from trading in derivatives must be computed first. The computation of turnover is an essential factor, as the applicability of a tax audit is determined based on turnover. If total sales, turnover, or gross receipt from the business during the previous year exceeds Rs. 1 crore, the tax audit shall be required in such cases. However, the increased threshold limit of Rs. 10 crores shall be applicable if cash receipts and cash payments during the year do not exceed 5% of the total receipt or payment, as the case may be. In other words, more than 95% of business transactions should be done through banking channels.
For example, during the year, Mr A has earned salary income and incurred losses from trading in futures and options (F&O). The details of his transactions are as follows:
Transaction | Buy Value | Sell Value | Realised P&L | Computation of Turnover |
Transaction 1 | 40,00,000 | 50,00,000 | 10,00,000 | 10,00,000 |
Transaction 2 | 60,00,000 | 30,00,000 | (30,00,000) | 30,00,000 |
Transaction 3 | 75,00,000 | 60,00,000 | (15,00,000) | 15,00,000 |
Transaction 4 | 3,20,00,000 | 2,00,00,000 | (1,20,00,000) | 1,20,00,000 |
Transaction 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 |
The turnover, in this case, shall be Rs. 2,75,00,000, and the loss from F&O shall be Rs. 55,00,000. The tax audit requirement arises if the business turnover from F&O exceeds Rs. 1 crore. However, the tax audit shall not be required if more than 95% of business transactions are done through banking channels and turnover is less than Rs. 10 crores. Since in F&O transactions, the trading shall be through digital means only, the enhanced limit of Rs. 10 crores shall apply to determine the applicability of tax audit. Thus, the tax audit shall not be required in this case.
FAQ 10. Analysis of the applicability of tax audit under different scenarios in case of professionals:
Case | Gross Receipts | Profit | Whether tax audit applicable? | Reason |
Case 1 | 40 Lakhs | 25 Lakhs | No | Gross receipts are less than Rs. 50 lakhs and profit is more than 50% of the gross receipts. |
Case 2 | 40 Lakhs | 10 Lakhs | Yes | Profits are lower than 50% of total gross receipts, and total income exceeds the maximum exemption limit. |
Case 3 | 40 Lakhs | 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 4 | 70 Lakhs | 50 Lakhs | Yes | Gross receipts exceed Rs. 50 lakhs. |
Case 5 | 70 Lakhs | 15 Lakhs | Yes | Gross receipts exceed Rs. 50 lakhs. The profit percentage is irrelevant here. |
FAQ 11. Do the provisions of tax audit under Section 44AB apply to the business income of Charitable/Religious Trusts registered under Section 12AB?
Sections 11 to 13 are special provisions governing the taxation of charitable or religious institutions. Section 12A provides the conditions to be fulfilled by any trust or institution to claim an exemption under Sections 11 and 12. Registration, maintenance of books of account, audit and filing of return of income are the conditions to be fulfilled to claim the exemption under Sections 11 and 12. Once these conditions are complied with, such an institution’s income shall be computed as per Sections 11 and 12.
The “income,” as referred to in Section 11(1), must be computed following commercial principles and not under the ordinary provisions of the Act. In other words, Section 14 and five heads of income do not apply to organisations registered under Section 12AB. The requirement of audit under section 44AB is under the head ‘Profit & Gain from Business’, and therefore, this audit is required only when the income is computed under the head ‘Profit & Gain from Business’ or there is a specific requirement of Tax audit under Section 44AB.
The Delhi Tribunal, in the case of United Educational Society v. Jt. CIT [2019] 107 taxmann.com 127, held that Provisions of Chapter IV-D, i.e., Sections 28 to 44D are applicable while computing the income of business or profession. These provisions do not apply in respect of charitable institutions whose income is to be computed under Sections 11 and 12 falling under Chapter III.
The Mumbai Tribunal, in the case of Asstt. CIT v. India Magnum Fund [2002] 81 ITD 295, held that provisions of Section 44AB cannot and do not apply in relation to incomes enumerated under Chapter III and are expressly excluded from total income. To reiterate, Section 44AB is operational only when profits and gains of business or profession are to be computed for the purpose of computation of total income to meet the requirements of the provisions of Section 4. That being so, any income that is designated as “incomes which do not form part of total income” has nothing to do with and cannot be subjected to the provisions of Section 44AB.
There are specific provisions for the audit of Charitable trusts under Section 12A. In such cases, the audit report has to be filed in Form 10B/10BB. Nothing in the Income-tax Act suggests that tax audit under Section 44AB shall apply to a business under Section 11(4A). Sections 11 to 13 are independent of the five heads of income. As long as the registration under Section 12AB is intact, the income cannot be computed under the five heads of income.
Tax audit is a specific requirement for the assessee having income under the head ‘Business and Profession’. Therefore, there is no obligation on the charitable institutions to get the accounts audited under Section 44AB. However, such institutions are subject to the audit under Section 12A(1)(b) read with Rule 17B, and a report of such audit is to be furnished in Form 10B/10BB.
However, the “Guidance Note on Tax Audit” issued by the ICAI provides that a trust or institution carrying on business may enjoy exemptions under Sections 10(21), 10(23A), 10(23B), 10(23BB), 10(23C) or 11. Such institutions will have to get their accounts audited and furnish such audit reports for purposes of Section 44AB if their turnover in business exceeds the prescribed limit (Rs. 1 crore and Rs. 10 crore in certain specified cases). But an agriculturist who does not have any income under the head “Profits and gains of business or profession” chargeable to tax under the Act need not get his accounts audited for purposes of Section 44AB even though his total sales of agricultural products may exceed the prescribed limit.
FAQ 12. Who is required to maintain books of accounts as per Section 44AA?
Section 44AA provides for the maintenance of books of account by an assessee under the Income-tax Act. The table below demonstrates the requirement for maintaining books of accounts by different taxpayers:
Nature of Business or Profession |
Category of Taxpayer | Threshold Limits for Income |
Threshold Limits for Gross Turnover or Receipts |
Specified Professions* | Any |
–
|
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 | – | 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 | – | 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 | – | 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 | – | Taxpayer claims that his profits are lower than the deemed profits. |
Presumptive Tax Scheme under Sec. 44BBB | Foreign Co. engaged in civil construction | – | 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
** Where a business or profession has been set up during the previous year, the threshold limit of income or gross receipts of the current year shall be checked. In other words, in the case of a new business or profession, if income or turnover or receipt of the current year, as the case may be, are not likely to exceed the threshold limit, the assessee shall not be required to maintain the books of account.
FAQ 13. What documents should be maintained by the taxpayers to comply with the requirement of maintenance of books of accounts as per Section 44AA?
The following documents should be maintained by the taxpayers to comply with the requirement of maintenance of books of accounts:
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. Mr A is maintaining books of accounts at more than one location. Is the address of all the locations to be mentioned in the audit report?
Clause 11 of Form 3CD requires a list of books maintained and the address at which such books of accounts are kept. If such books of accounts are kept at multiple locations, then the auditor is required to mention the address of all the locations along with the details of books of accounts maintained at each location. In the case of a company assessee, the auditor should verify whether Form AOC-5 has been filed with the Registrar of Companies under the Companies Act to maintain books of accounts at a place other than the registered office.
The auditor’s duties regarding ‘books of account maintained’ are not limited to merely giving a list of books of account against clause 11(b). He is required to examine the books of account maintained. Based on such examination, he is required to state in Form No. 3CB whether books of account kept are ‘proper books of account’.
- 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, screen play 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
Dive Deeper:
[FAQs] Computation of Gross Receipts/Turnover | Tax Audit | A.Y. 2023-24
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[FAQs] Disclosures & Reporting in Form 3CD | Tax Audit | A.Y. 2023-24
[FAQs] Income Computation & Disclosure Standards (ICDS) | Tax Audit | A.Y. 2023-24
[FAQs] Method of Accounting, GST & Ind AS under Tax Audit | A.Y. 2023-24
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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.