Loss of partnership firm

This query is : Resolved

Sumit Shaw (Querist)
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09 June 2016 WE ARE FIRM OF TWO PARTNERS, DUE TO SOME CIRCUMSTANCES, OUR P/L IS SHOWING A LOSS OF 132000/-. CAN SOMEONE SUGGEST ME WHETHER IN THIS CASE A TAX AUDIT U/S 44AB IS REQUIRED OR NOT??

CA SUNIL K GARG

CA SUNIL K GARG (Expert)
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10 June 2016 Tax Audit u/s 44AB does not depend upon profit or loss in P&L whereas it depends upon turnover during the year, whether profit is lower than 8% under section 44AD of the Income Tax Act, 1961.

Sumit Shaw

Sumit Shaw (Querist)
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11 June 2016 So Instead my case it is not applicable na.. Just needs to be confirmed??

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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03 August 2024 The requirement for a tax audit under Section 44AB of the Income Tax Act is based on several criteria. For a partnership firm, the key considerations are:

### **Tax Audit Requirements under Section 44AB:**

1. **Turnover Threshold:**
- If the **turnover** of the partnership firm exceeds ₹1 crore in a financial year, a tax audit under Section 44AB is mandatory, regardless of whether the firm shows a profit or a loss.

2. **Presumptive Income:**
- If the partnership firm is claiming presumptive taxation under Section 44AD or 44AE, the audit requirements and thresholds might be different.

3. **Loss Scenario:**
- If the firm’s turnover is below ₹1 crore and it shows a loss, a tax audit is generally not required. However, if the firm has opted for presumptive taxation under Section 44AD, then the audit requirement would apply even if there is a loss.

### **Determining Your Situation:**

Based on the information provided:

1. **Turnover Below ₹1 Crore:**
- If your firm's turnover is less than ₹1 crore and you are not claiming presumptive taxation under Section 44AD or 44AE, you are **not required** to undergo a tax audit under Section 44AB.

2. **Turnover Above ₹1 Crore:**
- If your firm’s turnover exceeds ₹1 crore, a tax audit is mandatory regardless of the profit or loss situation.

3. **Presumptive Taxation:**
- If the firm is covered under presumptive taxation schemes (e.g., Section 44AD), the audit requirement would be applicable even in case of a loss.

### **Conclusion:**

If your firm's turnover is below ₹1 crore and you are not covered under presumptive taxation schemes, you are **not required** to have a tax audit under Section 44AB.

However, it’s always good practice to consult with a tax professional or accountant to confirm your specific situation and ensure compliance with all applicable regulations.

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