Clarification regarding section 44ad & 44ab of income tax act 1961.

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PFA Provision of section 44AB, 44AD of Income Tax Act 1961 and FAQs mentioned on income tax site (https://www.incometaxindia.gov.in/_layouts/15/dit/mobile/faqs/faq-questions.aspx?key=FAQs+on+Tax+on+Presumptive+Taxation+Scheme&k=)

As mentioned in ACT under 44AB, that if assessee had opted 44AD in earlier previous year and now he is opting out from 44AD during the current previous year then he is liable to get audit of book of a/c.

but in FAQs

there is no points mentioned,

in first point, it is mentioned that if assessee is not opting 44AD and opt normal provision of income tax then normal provision ( turnover - expeneses = income ) will apply, then assessee will require to maintain books of account. and if turnover exceeds Rs. 1 crore then audit u/s 44AB will be applicable.

In Second point, it is mentioned that a person who is eligible for 44AD declares his income at a lower rate ( at less than 8%/6%), if he does so and his income exceeds maximum amount not chargeable to tax, then he is required to maintain books of account as per 44AA and has to get his accounts audit u/s 44AB.

Please go through and suggest me that if a partnership firm (Formed in may 2017) declares 90 lakh turnover and profit at 3.33% of 3 lakh in FY 2017-18 and he does not opt 44AD, he opt normal provision ( turnover - expeneses = income ) and maintain books of accounts as per 44AA and file ITR 5 ( applicable to partnership firm). then, is he liable to auidt?

Attached File : 2477347 20180709224245 act and faqs.zip downloaded: 84 times

Replies (2)

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

198338 Points Joined July 2016

Section 44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" :

Guest

Sir, as per section 44AB(e) Tax audit is required only if section 44AD(4) is applicable. and section 44AD(4) r.w.t. 44AD(5) explains about audit as per 44AB is required only when eligible person opt out from 44AD within the 5 succestive previous year from the previous year when he opted first.

whereas, In 44AB, it is not specified about 44AD(1) as you mentioned.

further as per your reply i am convinced that books of account is to be maintained but audit is not mandatory. As main objective of section 44AD is to give relaxation from maintaining books of accounts.