Audit and tax - simcard and easy recharge

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 August 2014 How to ascertain the turnover of Assesses w.r.t to Agent of Mobile Recharge coupons and Easy recharge business.
Whether sale or purchase of Easy recharge coupons liable for tax audit, since agents gets only the commission income on this which is below 1 crore?

Querist : Anonymous

Querist : Anonymous (Querist)

16 August 2014 Dear Expert please suggest possible opinions and treatment for the Simcard Card and easy Recharge Dealers under Income tax

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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15 July 2024 Determining turnover and tax audit applicability for agents dealing with mobile recharge coupons and easy recharge businesses involves a few key considerations:

### 1. Turnover Calculation

For assessing turnover related to mobile recharge coupons and easy recharge business:

- **Sale Value**: This includes the total amount received from customers for recharge services.
- **Commission Income**: Typically, agents earn commission from telecom service providers or recharge companies. This commission income forms a part of their turnover.

Agents should maintain records that clearly show their total receipts from recharge sales (both through coupon sales and easy recharges) and the commission income earned.

### 2. Tax Audit Applicability

Tax audit under Section 44AB of the Income Tax Act, 1961 is required if the turnover exceeds certain thresholds. For agents:

- **Turnover Threshold**: As per the latest provisions, a tax audit is mandatory if the total sales, turnover, or gross receipts of the business exceed ₹1 crore in a financial year.

### 3. Understanding Commission Income

- **Nature of Income**: Even though agents receive commission income rather than gross receipts from recharge sales, this commission is considered part of their turnover for tax purposes.
- **Inclusion in Turnover**: Both the sale value of recharge coupons (if agents are selling them directly) and the commission income they earn should be aggregated to determine turnover.

### 4. Documentation and Compliance

Agents should maintain proper books of accounts and financial records to accurately calculate turnover. This includes:

- Sales invoices or records of recharge transactions.
- Documentation showing commission received from telecom operators or recharge companies.
- Any other relevant financial documents supporting income and expenses related to the business.

### Conclusion

To ascertain turnover and determine tax audit liability:

- Calculate total receipts from sale of recharge coupons and commission income.
- Aggregate both these amounts to determine turnover.
- If turnover exceeds ₹1 crore in a financial year, the agent would be liable for tax audit under Section 44AB.

Agents should consult with a tax advisor or chartered accountant to ensure proper compliance with tax regulations and accurate calculation of turnover for their specific business activities related to mobile recharge and easy recharge coupons.

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