Tax Audit & Section 44AD: Cash Expenses Explained

This query is : Resolved

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This discussion clarifies whether a tax audit is required for a business with a turnover between one and two crore rupees, where all receipts are via bank transfer but cash expenses exceed 5% of the total. The consensus is that opting for Section 44AD and declaring a profit of at least 6% means a tax audit is not applicable, regardless of the cash expense percentage. The XML generation warning about cash expenses is addressed, confirming that selecting 'Yes' for cash expenses exceeding 5% does not trigger a tax audit if Section 44AD is correctly applied with the minimum profit declared.

R S Sai Kumar

R S Sai Kumar (Querist)
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29 January 2021 Dear All
One of my client has aqua business - the turn over is more than one crore and less than two crores. All the receipts are only through bank accounts and there are no cash receipts. But the expenses is more than 5% of total expenses - is tax audit applicable in this case. Please clarify.
R S Sai Kumar

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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29 January 2021 Opt for 44AD and declare profit not less than 6% tax audit not applicable.

CA Rashmi Gandhi

CA Rashmi Gandhi (Expert)
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29 January 2021 Tax audit applicable only if you declare profit less than 6%

R S Sai Kumar

R S Sai Kumar (Querist)
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30 January 2021 Thanks to all -- but when I am generating the xml file, it is showing warning - that - whether cash expenses are more than 5% of total expenses or not - the options are YES and No- The cash expenses are more than 5 percent, if I select "YES", then, is the Tax Audit applicable? Please let me know

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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30 January 2021 Select yes tax audit not applicable if you opt 44AD.

R S Sai Kumar

R S Sai Kumar (Querist)
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30 January 2021 Thanks to all for prompt support to me

Message likes : 1 times

CA Rashmi Gandhi

CA Rashmi Gandhi (Expert)
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30 January 2021 Welcome.... My Pleasure...

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