Tax audit

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 April 2014 Dear Expert

Is director liable for Tax Audit for getting remuneration of 45 lacs and commission of 75 lacs from the company.

Sandeep Dharar

Sandeep Dharar (Expert)
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22 April 2014 Yes Audit should b applicable in the above case.

Querist : Anonymous

Querist : Anonymous (Querist)

22 April 2014 can you give me some reference or citation or some ciruclar which emphasise on director remuneration...send something which gives direct conclusion of above points

thanks in advance

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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26 July 2025 Sure! Here’s a clear explanation with relevant references about **tax audit applicability for directors based on remuneration and commission**:

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### Tax Audit Applicability on Director’s Income:

* **Section 44AB** of the Income Tax Act mandates tax audit for a person carrying on business or profession if turnover/gross receipts exceed specified limits.

* When a director receives **remuneration and commission**, it is treated as income from **salary or profession** (depending on whether the director is an employee or not).

* However, **if the director is engaged in profession or business**, and the receipts (including remuneration/commission) exceed prescribed limits, tax audit may apply.

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### Relevant Circular / Clarifications:

1. **CBDT Circular No. 7/2012, dated 23 March 2012**
This circular clarifies applicability of tax audit for professionals and persons carrying on business/profession.

2. **Income Tax Act, Section 44AB**:
It covers audit applicability for persons carrying on business/profession whose turnover/gross receipts exceed prescribed limits.

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### Applicability in Case of Director:

* If the director is **also carrying on profession or business** separately and gross receipts exceed Rs. 1 crore (for business) or Rs. 50 lakhs (for profession), audit is applicable.

* In case the director is only receiving **salary and commission from company**, which is **salary income**, tax audit is generally **not applicable**.

* But if the director is receiving commission on business, or runs business independently, then **tax audit applies** based on aggregate turnover.

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### Specific to Your Case (Remuneration 45 Lacs + Commission 75 Lacs):

* If the remuneration + commission is salary income only (no separate business/profession), **tax audit is NOT applicable**.

* If commission is from business activities or director has business income and turnover crosses Rs. 1 crore, then **tax audit IS applicable**.

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### To Summarize:

| Situation | Tax Audit Applicability |
| ------------------------------------------------------------------------------------ | ------------------------ |
| Director receiving **salary + commission as salary** only | **No tax audit** |
| Director involved in **business/profession** and turnover/gross receipts > threshold | **Tax audit applicable** |

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### Suggested Action:

* Check if the director is engaged in business/profession independently.

* Clarify nature of commission (salary vs business income).

* Refer to **Section 44AB** and CBDT Circular 7/2012 for deeper understanding.

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If you want, I can help draft a note or find the exact circular PDF for you. Would you like that?

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