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Applicability of section 44ab

PVS Sastry (FCA) (47 Points)

25 May 2017

Hi friends,

Please clarify my doubt with regard to amendments in finance act,2016. Is audit under section 44AB compulsory in case of firms declaring profits higher than 8% of turnover and having turnover less than 2 crores. If answer is no, clarify whether interest and remuneration given to partners is allowable as deduction under section 40(b). Please provide a quick reply with suitable examples and sections.

Thanks in advance

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PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.) (1443 Points)
Replied 25 May 2017

If your turnover is less than 2 Crores and your book profit (Actual) is more than 8% then you are eligible to declare your income U/s 44AD. Because 44AD consider on deemed profit(8%) and actual profit whichever is higher In that case you are not liable for audit.

As per Finance Act 2016 40(b) is not allowable after calculation of section 44AD.

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CA Bhargav Nathwani (CA in Practice) (8307 Points)
Replied 25 May 2017

Originally posted by : PVS Sastry
	Hi friends, Please clarify my doubt with regard to amendments in finance act,2016. Is audit under section 44AB compulsory in case of firms declaring profits higher than 8% of turnover and having turnover less than 2 crores. If answer is no, clarify whether interest and remuneration given to partners is allowable as deduction under section 40(b). Please provide a quick reply with suitable examples and sections. Thanks in advance