Tax audit required on outsourcing business

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 March 2013 Dear Sir,

My client is in IT outsourcing business. He fetches the work online and the same is done through his employees.

His gross receipt has exceeded Rs. 25 lacs.

Whether he is liable for Tax Audit?

It is a business or profession?

Please guide

Thanks in advance.

CA. PIYUSH GOEL

CA. PIYUSH GOEL (Expert)
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20 March 2013 dear...

as per sec 44Ab every professional having its gross receipt more that 25 lac is liable to tax audit

and here professional means a person carrying on specified profession including engineering profession..

therefore it the services provided by your client relates to engineering then limit will be 25 lac otherwise one crore.

Querist : Anonymous

Querist : Anonymous (Querist)

20 March 2013 Dear Sir,

thanks for reply.

The client is in IT outsourcing. They get miscellaneous projects for web-development, programming etc from other countries through sites guru.com etc...

What is your opinion....?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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26 July 2025 Great question! Let me clarify the tax audit applicability for your client in the **IT outsourcing business**.

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### 🔍 **Is IT Outsourcing Business a "Business" or "Profession"?**

* **Business:** Generally, **IT outsourcing** involving **web development, programming, software services** is treated as a **business activity** under the Income Tax Act.

* **Profession:** Professions under Section 44AA(1) include specified ones like accountancy, law, engineering, architecture, medical, technical consultancy, etc.
**IT services** like programming and web development are **not** included in the specified list of professions.

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### ✅ **Tax Audit Applicability under Section 44AB:**

| Activity | Tax Audit Limit | Audit Required if Gross Receipts Exceed |
| ----------------------------- | ---------------------------------------------------- | --------------------------------------- |
| **Business** (IT outsourcing) | ₹1 crore (from FY 2020-21 onwards; earlier ₹1 crore) | ₹1 crore |
| **Profession** | ₹50 lakhs (₹25 lakhs earlier) | ₹50 lakhs |

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### 🧾 **For Your Client:**

* Since your client is providing **IT outsourcing services (web development, programming, etc.)**, it is considered a **business**.

* The **tax audit threshold** for business is ₹1 crore (or ₹10 crore if digital transactions exceed 95%, but your client is abroad, so less relevant).

* Your client’s **gross receipts of ₹25 lakhs** is **below the ₹1 crore limit** for business.

* Therefore, **tax audit under Section 44AB is NOT mandatory** yet for FY 2012-13 (or recent years, if ₹1 crore limit is applicable).

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### 🔹 **If It Were a Profession (like engineering consultancy):**

* The limit is ₹50 lakhs (₹25 lakhs earlier).

* If receipts exceed that, tax audit applies.

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### 📌 **Summary:**

| Question | Answer |
| ---------------------------------------------------- | -------------------------------------------------------- |
| Is IT outsourcing considered Business or Profession? | **Business** |
| Tax Audit Threshold for Business? | ₹1 crore (earlier ₹1 crore or ₹10 crore depending on FY) |
| Tax Audit Threshold for Profession? | ₹50 lakhs (₹25 lakhs earlier) |
| Tax Audit applicable at ₹25 lakhs gross receipts? | **No** (for business) |

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If you want, I can help draft a tax audit opinion or checklist for your client’s IT outsourcing business.

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**By the way, do you want insights on GST or international tax issues related to such IT exports?**

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