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audit u/s 44ad (Income Tax)

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This query is : Resolved


( Author )
16 March 2011

in a.y 2011-12 turnover is 2000000 and net profit is declared 100000 no other income. whether he req audit u/s44 AB. AS PER SECTION 44AD


Author Pulkit Gupta

( Expert )
16 March 2011

Audit is not compulsory if Gross Receipts is less than 60 Lakh and Net Profit is atleast 8% of Gross Receipts.
In ur case Net profit is less than 8 % so audit is required.
8% of 20 Lakh is 1.6 Lakh .
I suggest you to file return showing income around 1.70 Lakh.
No tax burden will be dere as the assessee gets exemption till 1.6 Lakh and he must have invested atleast Rs10000 in PPF/NSC/LIP/Mediclaim.


CA Ravi sisodia

( Expert )
16 March 2011

In the case if Net profit is less than 8 % so audit is required u/s 44AB.
This audit is count under threshold limit i.e. 45 maximum limit.


Pawan Singhal

( Author )
16 March 2011

i AM STILL cofusing someone say audit req , someone say not....

act say as per Sec 44 AD ASSESSES TOTAL iNCOME WILL BE MORE THEN TAXABLE INCOME IF HE DECLARING LOWER PROFIT ON HIS TURNOVER THEN HE WILL BE REQUIRED TO AUDIT U/S 44AB OTHERWISE NOT.



CA Ravi sisodia

( Expert )
16 March 2011

if you want to show less then 8% profit then audit should be required u/s 44 AB.

if you are shows 8% or more profit then no need to condect audit u/s 44AB.

if turnover is more then rs.60 lakhs then tax audit should be require u/s 44AB.


Pawan Singhal

( Author )
17 March 2011

AS PER SECTION 44AD ASSESSES IS REQUIRED TAX AUDIT IF HIS TOTAL iNCOME WILL BE MORE THEN TAXABLE INCOME AND HE IS DECLARING LOWER PROFIT ON HIS TURNOVER .THEN HE WILL BE REQUIRED TO AUDIT U/S 44AB OTHERWISE NOT.


Author Pulkit Gupta

( Expert )
17 March 2011

Pawan ji I will explain the provision case wise:-
Case A - Turnover greaterthan equal to 60 Lakh - Audit Compulsory
Case B - Turnover less than 60 Lakh
It will have two sub-parts
(a)Assessee showing Net Profit Grater than equal to 8% of turnover - No need of tax audit. For e.g. 1.65 Lakh Net Profit if Turnover is 20 Lakh
(b)Net Profit less than 8% of Turnover - Tax Audit Compulsory


Pawan Singhal

( Author )
17 March 2011

Dear pulkitji
as per sec 44ad audit is compulsory if

(1)Net Profit less than 8% of Turnover
AND
(2)HIS TOTAL iNCOME WILL BE MORE THEN TAXABLE INCOME.
SO IF I DECLARED LESS THAN 8% PROFIT ON TURNOVER AND MY INCOME NOT EXCEEDS TAXABLE INCOME . THEN I WILL NOT REQ. TAX AUDIT AS PER SEC 44AD.

THAT'S MY POINT TOTAL INCOME NOT EXCEEDS TAXABLE INCOME.



CMA. CS. Sanjay Gupta

( Expert )
17 March 2011

Dear Pulkit And Ravi Ji Pawant Ji is correct in his assessment. He has declared income less than 8% and his taxable income is also below the taxable limit and therefore Tax Audit u/s 44AB is not required.


CMA. CS. Sanjay Gupta

( Expert )
17 March 2011

See point no 6 below.....

Sec 44AD: The salient features of the new presumptive taxation scheme are as under:


1. The scheme is applicable to individuals, HUFs and partnership firms excluding Limited liability partnership firms. It is also not be applicable to an assessee who is availing deductions under sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading “C.—Deductions in respect of certain incomes” in the relevant assessment year.
2. The scheme is applicable for any business (excluding a business already covered under Sec. 44AE) which has a maximum gross turnover /gross receipts of 60 lakhs.
3. The presumptive rate of income is prescribed at 8% of gross turnover /gross receipts.
4. An assessee opting for the above scheme is exempted from payment of advance tax related to such business under the current provisions of the Income-tax Act.
5. An assessee opting for the above scheme is exempted from maintenance of books of accounts related to such business as required under section 44AA of the Income-tax Act.
6. An assessee with turnover below Rs. 60 lakhs, who shows an income below the presumptive rate prescribed under these provisions, in case his total income exceeds the taxable limit, required to maintain books of accounts and also get them audited.
7. The existing section 44AF is to be made inoperative for the assessment year beginning on or after 1st April, 2011.





CA Ravi sisodia

( Expert )
17 March 2011

sec.44 AB or sec.44AD ??? which section applicable in this case ??


CA Ravi sisodia

( Expert )
17 March 2011

According to me audit is required u/s 44AB.


CMA. CS. Sanjay Gupta

( Expert )
17 March 2011

Under provisions of section 44AB, every person carrying on business is required to get his accounts audited if the total sales, turnover or gross receipts in business exceed 60 lakh rupees in the previous year. Similarly, a person carrying on a profession is required to get his accounts audited if the gross receipts in profession exceed 15 lakh rupees in the previous year.


Here turnover is Rs 20 Lakh then how sec 44AB will be applicable?


CA Ravi sisodia

( Expert )
17 March 2011

but sec.44AD will be applicable for Civil Construction buisness.

section 44AD has been introduces
for simplification of tax Computation relating to Civil Construction buisness.


CA Ravi sisodia

( Expert )
17 March 2011

Author is not write that this is the case of Civil Construction buisness.


CMA. CS. Sanjay Gupta

( Expert )
17 March 2011

But since he is asking for applicability of Sec 44AD in the heading of his query it is to be presumed.


CA Ravi sisodia

( Expert )
17 March 2011

HE WRITTEN - whether he req audit u/s44 AB. AS PER SECTION 44AD (PLEASE REFER LAST LINE OF QUERY?


CMA. CS. Sanjay Gupta

( Expert )
17 March 2011

AD:
Case A - Turnover greater than equal to 60 Lakh - Audit Compulsory
Case B - Turnover less than 60 Lakh
It will have two sub-parts
(a)Assessee showing Net Profit Grater than equal to 8% of turnover - No need of tax audit. For e.g. 1.65 Lakh Net Profit if Turnover is 20 Lakh
(b)Net Profit less than 8% of Turnover but total income exceeds the taxable limit - Tax Audit Compulsory.

Here Net profit is below 8% and total income also below taxable limit, therefore assessee is not required to get the accounts audited and furnish a report of such audit as required under section 44AB.


Please tell do you agree with this or not?



CA Ravi sisodia

( Expert )
17 March 2011

yes dear agreed......


Author Pulkit Gupta

( Expert )
18 March 2011

But Sanjay Bhaiya I still have a confusion.
An assessee can make manipulation to show his total income less than taxable limit.
For e.g. Showing Net Profit @ 5 % on 30 Lakhs will make his income from PGBP = Rs. 150000 which is less than taxable limit.
So no audit is reqd.??
Pls correct me if I am wrong in my interpretation


Pawan Singhal

( Author )
18 March 2011

Yes Dear Pulkit,
In this case No Tax audit is required.







Author Pulkit Gupta

( Expert )
18 March 2011

But Pawan ji then Assessee can choose any % of profit.
Why will he choose 8 %. He can also choose 5,6 or 7% of Gross Receipts.
I request other experts to clarify this issue.


Pawan Singhal

( Author )
18 March 2011

in my case turnover is related to all small business whose total turnover not more than Rs.60Lakh . Because from A.Y. 2011-12 sec 44ad applicable to all small business .


CMA. CS. Sanjay Gupta

( Expert )
18 March 2011

Dear Pulkit it is the section which provides this rule. It says if you declare profit less than 8% but your total income exceeds the maximum amount which is not chargeable to incometax. Then tax audit u/s 44AB will apply. Also i am mailing you pdf file for your reference.


Pawan Singhal

( Author )
18 March 2011

I also think so but As per sec 44ad if you are declaring income lower than 8% and total in not exceed taxable income. then tax audit is not required.


CMA. CS. Sanjay Gupta

( Expert )
19 March 2011

@ Ravi Ji..

As per The Council General Guidelines, 2008, dated 8-8-2008, the audits conducted under sections 44AD, 44AE and 44AF of the Income-tax Act,1961 shall not be taken into account for the purpose of reckoning the "specified number of tax audit assignments."


CA Ravi sisodia

( Expert )
19 March 2011

yes dear sanjay ji, audits conducted under sections 44AD, 44AE and 44AF shall not count in 45 tax audits limit.


Arun Gupta

( Expert )
11 April 2011

In my view Tax audit is not mandatory when 1) turnover below 60 lacs ,profit below 160000/-(in case of a male)
2) thease types of tax audits (44AD,44AE) are not included in ceiling of 45 audits.


Arun Gupta

( Expert )
11 April 2011

so I am completly agree with pawan singhal ji


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