Tax Aduit Limit u/s 44AB
This query is : Resolved
21 October 2020
Dear Experts,
An assessee earned Business Loss of Rs. 2.85 Lacs from Speculative & Non-Speculative transactions for FY 2019-20.
His Gross Total Income is Rs. 7 Lacs.
Turnover as per 44AB for Speculative & Non-Speculative - absolute value of profit/loss + premium on sale of options is 9 Lacs.
Queries:
1. Whether tax audit is applicable in its case?
2. If tax audit is applicable the under which section of 44AB?
An assessee earned Business Loss of Rs. 2.85 Lacs from Speculative & Non-Speculative transactions for FY 2019-20.
His Gross Total Income is Rs. 7 Lacs.
Turnover as per 44AB for Speculative & Non-Speculative - absolute value of profit/loss + premium on sale of options is 9 Lacs.
Queries:
1. Whether tax audit is applicable in its case?
2. If tax audit is applicable the under which section of 44AB?
21 October 2020
Tax audit not applicable if 44AD not opted during the previous year.
21 October 2020
There was no business income in previous financial year. The assessee was an NRI and became Resident+ROR for the 1st time in FY 2019-20.
So whether he should be audited under any section of 44AB? Can he file the IT Return without Tax audit and can Cfrwrd his losses of speculation.
So whether he should be audited under any section of 44AB? Can he file the IT Return without Tax audit and can Cfrwrd his losses of speculation.
21 October 2020
Yes, tax audit not required file ITR with carried forward speculative loss.
22 October 2020
Sir, in my case, a CA is issuing an audit report u/s 44AB(e) where provisions of section 44AD(4) are applicable.
Turnover for 44AB is Rs. 15 Lacs and Taxable total income is Rs. 10 Lacs. Business Loss of Rs. 2.5 Lacs as mentioned above.
a. Whether i will have to get my accounts audited in the next 5 AY and also i cannot claim 44AD also in the next 5 AY because of the tax audit in FY 2019-20?
Turnover for 44AB is Rs. 15 Lacs and Taxable total income is Rs. 10 Lacs. Business Loss of Rs. 2.5 Lacs as mentioned above.
a. Whether i will have to get my accounts audited in the next 5 AY and also i cannot claim 44AD also in the next 5 AY because of the tax audit in FY 2019-20?
26 July 2025
Great question! Let me clarify the **Tax Audit applicability under Section 44AB** and related points based on your scenario:
---
### Key points from your case:
* Business loss of Rs. 2.85 Lacs from speculative & non-speculative transactions in FY 2019-20
* Gross Total Income: Rs. 7 Lacs
* Turnover as per 44AB (including absolute profit/loss + premium on options): Rs. 9 Lacs
* CA is issuing audit report under **Section 44AB(e)** considering provisions of **44AD(4)**
---
### 1. **When is Tax Audit applicable under Section 44AB?**
* Tax audit is **mandatory** if turnover/gross receipts exceed **Rs. 1 crore** (Rs. 10 crore in certain conditions) for business under normal provisions.
* For business covered under **Section 44AD** (presumptive taxation scheme), tax audit is mandatory if:
* The taxpayer **opts out of Section 44AD** (i.e., declares profits lower than presumptive income), OR
* If **profits declared are less than 6% (or 8% for digital transactions)** of turnover.
* And turnover exceeds Rs. 2 crores (Rs. 50 lakhs if presumptive scheme opted for profession under 44ADA).
* Speculative business income has its own considerations. Tax audit under 44AB can apply to speculative businesses if turnover exceeds Rs. 1 crore.
---
### 2. **Your case with Rs. 9 lakhs turnover**
* Turnover of Rs. 9 lakhs is **below the Rs. 1 crore threshold** applicable for speculative/non-speculative business tax audit limit.
* Also, **total income Rs. 7 lakhs is below the basic exemption limit for tax audit applicability** in your case.
* So, **tax audit is generally NOT applicable for FY 2019-20** if presumptive scheme under 44AD was not opted out and turnover is below threshold.
---
### 3. **Impact of audit report under 44AB(e)**
* If a CA issues an audit report u/s 44AB(e), it means they treated you as needing audit, possibly because of opting out of 44AD or some other reason.
* **If tax audit is conducted, the assessee cannot claim presumptive taxation benefits under Section 44AD for 5 years** (i.e., must maintain books and get audit for next 5 years).
* This is mandatory if audit is due to opting out or declaring profits lower than prescribed limits.
---
### 4. **Your question: Will you have to get accounts audited in next 5 AY and lose 44AD benefit?**
* If the audit is **mandatory as per law** (because you opted out of 44AD or declared profits less than 6%/8%), yes:
* You must get accounts audited for next 5 AY.
* Cannot claim presumptive taxation under 44AD for 5 years.
* However, if the turnover is below threshold and you have not opted out of 44AD, audit is **not mandatory**, and presumptive scheme can continue.
---
### Summary for your case:
| Criteria | Your Case | Tax Audit Applicability |
| --------------------------------- | --------------------- | ----------------------------------------- |
| Turnover (speculative + non-spec) | Rs. 9 Lakhs | Below Rs. 1 crore threshold — No audit |
| Opting out of 44AD | Not specified | Audit needed if opted out |
| Declared profit less than 6% | Not specified | Audit needed if less than prescribed % |
| Total income Rs. 7 Lacs | Below exemption limit | No audit needed |
| CA issuing audit under 44AB(e) | Yes | May be precautionary or due to opting out |
---
### What should you do?
* Confirm if you opted out of presumptive taxation under 44AD in your return.
* If you have NOT opted out, and turnover is below threshold, audit is NOT mandatory.
* If you opted out or declared profits below 6%, audit is mandatory and 44AD benefits will be lost for 5 years.
* Consult your CA to confirm the basis for audit report and correct course of action.
---
If you want, I can help draft a simple checklist or explain section 44AD/44AB in detail for your situation. Just ask!
---
### Key points from your case:
* Business loss of Rs. 2.85 Lacs from speculative & non-speculative transactions in FY 2019-20
* Gross Total Income: Rs. 7 Lacs
* Turnover as per 44AB (including absolute profit/loss + premium on options): Rs. 9 Lacs
* CA is issuing audit report under **Section 44AB(e)** considering provisions of **44AD(4)**
---
### 1. **When is Tax Audit applicable under Section 44AB?**
* Tax audit is **mandatory** if turnover/gross receipts exceed **Rs. 1 crore** (Rs. 10 crore in certain conditions) for business under normal provisions.
* For business covered under **Section 44AD** (presumptive taxation scheme), tax audit is mandatory if:
* The taxpayer **opts out of Section 44AD** (i.e., declares profits lower than presumptive income), OR
* If **profits declared are less than 6% (or 8% for digital transactions)** of turnover.
* And turnover exceeds Rs. 2 crores (Rs. 50 lakhs if presumptive scheme opted for profession under 44ADA).
* Speculative business income has its own considerations. Tax audit under 44AB can apply to speculative businesses if turnover exceeds Rs. 1 crore.
---
### 2. **Your case with Rs. 9 lakhs turnover**
* Turnover of Rs. 9 lakhs is **below the Rs. 1 crore threshold** applicable for speculative/non-speculative business tax audit limit.
* Also, **total income Rs. 7 lakhs is below the basic exemption limit for tax audit applicability** in your case.
* So, **tax audit is generally NOT applicable for FY 2019-20** if presumptive scheme under 44AD was not opted out and turnover is below threshold.
---
### 3. **Impact of audit report under 44AB(e)**
* If a CA issues an audit report u/s 44AB(e), it means they treated you as needing audit, possibly because of opting out of 44AD or some other reason.
* **If tax audit is conducted, the assessee cannot claim presumptive taxation benefits under Section 44AD for 5 years** (i.e., must maintain books and get audit for next 5 years).
* This is mandatory if audit is due to opting out or declaring profits lower than prescribed limits.
---
### 4. **Your question: Will you have to get accounts audited in next 5 AY and lose 44AD benefit?**
* If the audit is **mandatory as per law** (because you opted out of 44AD or declared profits less than 6%/8%), yes:
* You must get accounts audited for next 5 AY.
* Cannot claim presumptive taxation under 44AD for 5 years.
* However, if the turnover is below threshold and you have not opted out of 44AD, audit is **not mandatory**, and presumptive scheme can continue.
---
### Summary for your case:
| Criteria | Your Case | Tax Audit Applicability |
| --------------------------------- | --------------------- | ----------------------------------------- |
| Turnover (speculative + non-spec) | Rs. 9 Lakhs | Below Rs. 1 crore threshold — No audit |
| Opting out of 44AD | Not specified | Audit needed if opted out |
| Declared profit less than 6% | Not specified | Audit needed if less than prescribed % |
| Total income Rs. 7 Lacs | Below exemption limit | No audit needed |
| CA issuing audit under 44AB(e) | Yes | May be precautionary or due to opting out |
---
### What should you do?
* Confirm if you opted out of presumptive taxation under 44AD in your return.
* If you have NOT opted out, and turnover is below threshold, audit is NOT mandatory.
* If you opted out or declared profits below 6%, audit is mandatory and 44AD benefits will be lost for 5 years.
* Consult your CA to confirm the basis for audit report and correct course of action.
---
If you want, I can help draft a simple checklist or explain section 44AD/44AB in detail for your situation. Just ask!
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