44AD & 44AB

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Rajeev Tahilramani

Articled Assistant

24 Points Joined October 2016

As per section 44AD, if an eligible assessee shows his/her income less than 8% of his turnover or gross receipts then he has to maintain books of accounts and get audited his books as per section 44AB..(tax audit)....So my query is that if someone has incurred a loss i.e. he will be showing business loss in his ITR 3....so obviously loss incurred will be less than 8 % of tunrover...so does that mean he will liable for Tax Audit....?

Replies (3)

neeraj gupta

1138 Points Joined March 2017

Apparently yes, if he wants to declare loss.

Deval M. Thakkar

Student CA Final and Article Assistant a

368 Points Joined December 2013

as per guidline on tax audit if loss is less then the basic expemption limit i.e. 250000 for individual then no need for audit....however if the assessee is other than individual then audit is must.

neeraj gupta

1138 Points Joined March 2017

Hi Deval, thanks for correcting me on that.

I just had a relook at 44AB. Just wanted to double check myself on the limit part. Couldn't find any mention in Sec44AB about limit on losses.

44(d) and (e), just says that if assessee eligible for 44ADA and 44AD, then audit is necessary if "... his income exceeds the maximum amount which is not chargeable to income-tax..".

This means that any amount of loss would be a negative income and hence below 2.5L positive income. And there is no limit on loss other than the implicit limit imposed by the turnover under 44ADA and 44AD.

Would be more than happy to hear your and any other experts' views on it.

(d) carrying on the 34[profession] shall, if the profits and gains from the 34[profession] are deemed to be the profits and gains of such person under 35[section 44ADA] and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his 34[profession] and his income exceeds the maximum amount which is not chargeable to income-tax in any 36[previous year; or]

37[(e) carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,]