44AD INCOME TAC ACT

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This discussion clarifies the applicability of Section 44AD of the Income Tax Act for a partnership firm with a turnover of ₹40 lakhs. The firm's net profit is below 7% of turnover after partner remuneration and interest, with 97% of turnover in cash. Crucially, the firm has not opted for 44AD in the last five years and had a tax audit under Section 44AB last year. The consensus suggests that a tax audit is not applicable under these circumstances, especially as the turnover is below ₹1 crore and 44AD wasn't chosen previously.

Rajesh Topiwala

Rajesh Topiwala (Querist)
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12 September 2025 A partnership firm having a turnover of 40 lacs. but their net profit is less than 7 % of turnover after deducting remuneration & interest on capital to partners, 97 % turnover is in cash.
My query is whether it is subject to audit u/s 44AD for A.Y. 2025-26?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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12 September 2025 Whether sec. 44AD was opted in any of earlier five years?

Rajesh Topiwala

Rajesh Topiwala (Querist)
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12 September 2025 NO 44AD SINCE 5 YEARS. LAST YEAR TOO WE HAD DONE AUDIT U/S 44 AB. SALES THAN 40 LACS TURNOVER EACH YEAR. BUT LANGUAGE OF SECTION 44 AD READ WITH 44AB, CREATES CONFUSION. SOME SAYS NO AND SOME SAYS YES.
PLEASE CLARIFY

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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12 September 2025 No tax audit applicable if turnover less than 1 Cr. and sec. 44AD was not opted in any of previous FIVE years.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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19 September 2025 Good Luck...

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