Section 44ad
This query is : Resolved
13 September 2014
I have an one propritorship and its annual turnover is Rs. 60,00,000 and my profit is below basic exemption limit.So I am not liable to pay tax. Can I liable for audit under section 44AD.
13 September 2014
No audit required if your profit not exceeds basic exemption limit
14 September 2014
Sec 44 AD applies only where the turnover is less than 1 crore. In that case simply assume 8% as total income and file return. If you want to show profit less than 8% then you have to get tax audit done.
14 September 2014
If the offered income is less than basic exemption limit no tax audit is required.
05 December 2015
in this case my profit also below limit of sec.44ad. i. e. below 8% and I am not liable to pay tax. now I required for audit..
23 July 2025
This is a very common and important question under Section 44AD regarding tax audit in case of:
Turnover < ₹1 crore
Profit < 8% (or 6% for digital receipts)
Total income < basic exemption limit (₹2.5 lakh for individuals)
✅ Your Case:
Proprietorship business
Turnover = ₹60,00,000
Profit < 8% of turnover
Profit is also below basic exemption limit (i.e. no tax liability)
❓ Are you liable for tax audit under Section 44AB?
✅ Answer: No, you are not required to get tax audit in this case.
🔍 Explanation:
As per proviso to Section 44AB(e):
If an eligible assessee (under Section 44AD) declares income less than 8% (or 6%) and his total income exceeds the basic exemption limit, then audit under Section 44AB is mandatory.
But in your case:
You declared income < 8%, and
Your total income is < ₹2.5 lakh, i.e., below the basic exemption limit
👉 Therefore, no audit is required.
📘 Supporting Reference:
CBDT Circular No. 5/2010, dated 3rd June 2010, clarifies this point:
If income declared is less than deemed income (8%), and the total income does not exceed the maximum amount not chargeable to tax, tax audit is NOT required.
✅ Conclusion:
Condition Status
Turnover < ₹1 crore ✅ Yes
Profit < 8% ✅ Yes
Total income < ₹2.5 lakh ✅ Yes
Tax audit under Sec 44AB required? ❌ No
You're safe from tax audit in this scenario.
Turnover < ₹1 crore
Profit < 8% (or 6% for digital receipts)
Total income < basic exemption limit (₹2.5 lakh for individuals)
✅ Your Case:
Proprietorship business
Turnover = ₹60,00,000
Profit < 8% of turnover
Profit is also below basic exemption limit (i.e. no tax liability)
❓ Are you liable for tax audit under Section 44AB?
✅ Answer: No, you are not required to get tax audit in this case.
🔍 Explanation:
As per proviso to Section 44AB(e):
If an eligible assessee (under Section 44AD) declares income less than 8% (or 6%) and his total income exceeds the basic exemption limit, then audit under Section 44AB is mandatory.
But in your case:
You declared income < 8%, and
Your total income is < ₹2.5 lakh, i.e., below the basic exemption limit
👉 Therefore, no audit is required.
📘 Supporting Reference:
CBDT Circular No. 5/2010, dated 3rd June 2010, clarifies this point:
If income declared is less than deemed income (8%), and the total income does not exceed the maximum amount not chargeable to tax, tax audit is NOT required.
✅ Conclusion:
Condition Status
Turnover < ₹1 crore ✅ Yes
Profit < 8% ✅ Yes
Total income < ₹2.5 lakh ✅ Yes
Tax audit under Sec 44AB required? ❌ No
You're safe from tax audit in this scenario.
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