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Tax audit section 44ad

C Reddy (Entreprenuer) (133 Points)

17 June 2015

Respected Members,

I have a few doubts on tax audit for partnership firms, especially with regard to Section 44AD. Suppose the Partnership Firm has a turnover of Rs.1,00,000 in a financial year and the net profit after remuneration and other expenses comes to Rs.7,000 which is less than 8% of the turnover. Is tax audit mandatory in this situation?

Does this also apply to loss?

What are the other provisions of this section. Please clarify.

Thanks in advance.

Regards

Chandana

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12 Replies

CMA Poornima Madhava (CMA) (13097 Points)
Replied 17 June 2015

As I understand, tax audit is required. Provisions say that if lower income than demeed profits & gains are declared, then

The taxpayer has to maintain books of account as per 44AA (irrespective of the turnover) if his total income exceeds the exemption limit
The taxpayer has to get his books audited u/s 44AB (irrespective of turnover) if his total income exceeds the exemption limit

Since it is a partnership firm, there is no exemption limit.

Ramanuj (Accountant.) (834 Points)
Replied 17 June 2015

Dear all

I think Tax Audit is required becouse profit shown less than 8% as pe rules

Thanks

Ramanuj

Mahadev Desai (proprietor) (24 Points)
Replied 17 June 2015

Under 44AD there two conditions 1profit less than 8% 2 total income more than basic exemption limit If both these conditions are fulfilled than only tax audit is applicable

sourabh (employed) (46 Points)
Replied 17 June 2015

But for partnership firms net profit before remuneration etc. Is to be seen.

prasad bhatt (Chartered accountant) (26 Points)
Replied 17 June 2015

In case of partnership firm the profit of 8% to be considered is profit before remuneration and interest.

Vikramadityasingh Rathod (Chartered Accountant) (28 Points)
Replied 17 June 2015

Read sec 44AD(2) properly. Sec 44AD(1) requires the profit to be 8%. Sec 44AD(2) says remuneration and interest to partners is deductible from profit declared under sec 44AD(1). So the criteria of 8% is before deduction u/s 40(b).

1 Like

nilesh (Student CA Final ) (23 Points)
Replied 17 June 2015

Books of accounts u/s 44AA and tax audit u/s 44AB is compulsory

rajkumar goyal (manager) (67 Points)
Replied 17 June 2015

I am agree with RESPECTED vikram.singh rathod`s opinion

Vijay Rathod (CA) (25 Points)
Replied 17 June 2015

I also agree with respected rathod

i.k.patel (tax consultant) (43 Points)
Replied 18 June 2015

Net profit @ 8% will be calculated before allowing interest on capital and remuneration to partners. if net profit before intt. on capital and remuneration is more than 8% than no need to audit u/s. 44AB.