Audit Limit Applicability

In case of Business

1) If a person is having turnover/ sales / gross receipts of under 1cr in an FY and his net profit is less than 6% does his account is liable to get audited or not?

2) If a person having turnover of under 5cr in an FY and 98% of Payment & Receipt is via banking channel and his net profit is less than 6%. Does his account is liable to get audited or not?

3) What is minimum and maximum audit threshold turnover and net profit limit?
Replies (4)
Quick Summary
This discussion clarifies the rules around tax audit applicability in the UK. It explains that for businesses with turnover under £1 crore, an audit is generally not required. For those under £5 crore, an audit may still be necessary if cash transactions exceed 5% of total payments and receipts. The content also touches upon presumptive taxation under Section 44AD, highlighting specific turnover and profit percentage thresholds that can trigger an audit.

1. Tax audit is not required as turnover is less than 1 crores rupees.

2. In this case also tax audit is not applicable as payments and receipts are 98% in online mode and 2% in cash. Further also turnover is less than 5 crores rupees.

3. If payments and receipts are above 5% in cash then tax audit is applicable even if turnover is less than 5 crores rupees. And in case under presumptive taxation if profit is less than 8% of turnover or 6% of turnover then audit is also required u/s 44AD

 "As per section 44AB of the Income Tax Act,1961, any person carrying the business is required to get his books of accounts audited if the gross receipts/turnover exceeds ₹1 crore during the year (In case of presumptive taxation u/s 44AD, the threshold limit is ₹2 crores).

So in simple words, If your annual gross turnover/receipts from business exceed Rs. 1 Crore, you need to be audited u/s 44 AB. But you may avoid such audit u/s 44AD if your annual gross turnover/receipt is below 2 Crore.

Is there any provision that minimum profit should be 6/8% or income should be under basic exemption limit?
That is under presumptive taxation u/s 44ad

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