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Am I required to do tax audit

Karan (student) (167 Points)

05 January 2022

if i have business receipt of 19500000 from one business and 600000 from another business(I am proprietor in both the businesses) whether i need to do audit of both business

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11 Replies

CA Puja Sharma (Chartered Accountant) (4874 Points)
Replied 05 January 2022

No, a tax audit will not be required provided you report income u/s 44AD(without books of accounts) and claim profit more than 6% or 8% or turnover as applicable. If you want to claim a lower profit here then an audit is required.

Further, if more than 95% of your payments and receipts are through the bank then also you are not required to get your accounts audited. You can claim actual profit here.

1 Like

Karan (student) (167 Points)
Replied 05 January 2022

Ma'am total turnover comes out to be 2cr 1lac which is more than threshold limit for 44Ad ..can u please tell me the basis on which u came to the conclusion that tax audit is not required ...thanks in advance

CA Puja Sharma (Chartered Accountant) (4874 Points)
Replied 05 January 2022

Sorry for the confusion, read the wrong figure. Tax audit applicable u/s 44AD also

However, if more than 95% of your payments and receipts are through the bank then you are not required to get your accounts audited.

praveen (Chartered Accountant) (6971 Points)
Replied 05 January 2022

Tax Audit applicability is as follows

(1) If Turnover is < 1 Crore - Then No Tax audit [but if assessee had opted for 44AD previously and is still in the block, then he needs to get tax audit done in the year he is moving to normal scheme]

(2) If Turnover is between 1 Crore to 2 Crores- [If assessee goes for 44AD then no tax audit / If not then check the next point]

(3) If turnover is between 1 Crore to 10 Crore - No Tax Audit [If the 95% of the receipts / payments are made through account payee cheque or other modes prescribed through banking channels]

Otherwise Tax Audit needs to be made

Karan (student) (167 Points)
Replied 05 January 2022

Thanks for your replies ..but my basic question is whether I need to get accounts audited of both the businesses or I can do audit of my 1 business whose turnover is 1.95lac and show other business u/s 44ad

Aarti Maurya (Student) (3053 Points)
Replied 10 January 2022

As per provisions of section 44AB any business where total turnover or gross receipts exceeds Rs 100 lakhs is required to compulsory tax audit under income tax act.

If income of any person is to be computed on presumptive basis under 44AD or 44ADA or 44AE but the person has rejected presumptive income,in such cases such person is required to get the accounts audited.I hope you have information about presumptive scheme.

Kev Men (756 Points)
Replied 13 April 2022

Since there are 2 'sole proprietorships', there will be a common PAN. Hence, turnover of both the businesses will be combined for tax audit criteria. So tax audit will be applicable.

There can be another view as sec 44AB states that turnover of the 'business' exceeds 1 crore, this can be interpreted as criteria should be considering individual business separately. This interpretation will lead to Tax audit applicability for the 1.95 crore business and no tax audit for the other business.

However, it is advisable to do tax audit for both the business as in the ITR, the balance sheets will be combined as there is no separate criteria for more than 1 sole proprietorships and also common PAN will be there.

JJJ (Need help) (673 Points)
Replied 13 April 2022

It seems you and both your businesses have the same PAN. Which means from a tax perspective all three are a single entity will be taxed as such.

You cannot separate the source of income to determine tax individually. However, if applicable, you can report the same total income split into more than one nature of income.

gk (service) (156 Points)
Replied 26 June 2022

Dears,

If the income earned are from Long / Short term capital gain (mainly from equity trades/investments) - on what condition we should require an audit? How the turnover in equity trading / investment will make a cause for the audit requirement?

Please clarify.

thanks,

Regards

CA Puja Sharma (Chartered Accountant) (4874 Points)
Replied 01 July 2022

Both your businesses will be audited. When we check audit eligibility, the turnover of all the businesses is added to check the limit of Rs. 1 Crore, 2 Crores or 10 Crores as applicable.