How to check whether Tax Audit Applicable

A)   Individual, HUF, Firm  (as sec. 44AD will be applicable)

a)    Gross receipts of Individual carrying Profession exceeds 25 Lakhs or Turnover of any assessee carrying any business exceeds 1 crore, such assessee will be subject to tax audit

 

b)   Turnover < 1crore

1.     turnover  1 crore or less and 

2.     net profit less than 8% and 

3.     total income of assessee more than maximum limit chargeable to tax and

4.     assessee carrying eligible business, assessee will be subject to tax audit

 

c)    If any of  conditions in b) above are not satisfied: Assessee will not be subject to tax audit

 

B)   Other assessee( Company, LLP etc) (as sec. 44AD is not  applicable)

a)    turnover more than 1 crore , assessee will be subject to tax audit

b)   turnover 1 crore or less , assessee will not be subject to tax audit

c)    Applicability of Tax Audit u/s 44AE, 44BB, 44BBB is to be checked.

 

SEC 44AD: Tax audit is compulsory even if turnover less than 1 crore but profit is less than 8% for  

 

a)     "eligible assessee"(Individual, Huf, Firm, not LLP)  

b)     carrying "eligible business"( Manufacture, whole seller, Retailer, job worker, but profession and business of plying , hiring and leasing not covered, ) and 

c)     if the taxable income is  above the minimum limit of taxation. [Sec 44AD(5)] (See sec 44AD for more details)

 

Question  

a) Mr. X has Income the following income in the AY 2013-14

Salary Income                                                                    -              Rs.1,70,000/-

Business Income (T.O.- Rs.30 Lac)                                      -              Rs.   20,000/-

Total                                                                         Rs.1,90,000/-

Will he require to get his accounts audited as per Section 44AD.

 

b) What will be the situation when, he shows business income of Rs.1,90,000/- whose T.O. is Rs.99.00 lac.-- 

c) What will be the situation when, he shows business income of Rs.20,000/- whose T.O. is Rs.99.00 lac.-

 

Answer: As per Section 44AD (5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.

a)     As his total income does not exceeds the maximum amount which is not chargeable to income-tax, he will not liable to tax audit even if profit is less than 8% of turn over.

b)     As his total income does  exceeds the maximum amount which is not chargeable to income-tax, he will be liable to tax audit as profit is less than 8% of turnover and turnover does not exceed 1 crore 

c)     As his total income does not exceeds the maximum amount which is not chargeable to income-tax, he will not liable to tax audit even if profit is less than 8% of turn over.