Finance
4545 Points
Joined September 2020
Certainly! Let’s delve into the provisions related to tax audit under Sections 44AA, 44AB, and 44AD of the Income Tax Act, 1961:
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Section 44AA:
- This section pertains to the maintenance of books of accounts by certain taxpayers.
- It specifies that if an individual or a Hindu Undivided Family (HUF) is engaged in a profession, they must maintain proper books of accounts.
- Additionally, if their income exceeds the maximum amount not chargeable to income tax, they are required to get these accounts audited under Section 44AB.
- For instance, if a professional’s income is deemed to be the profits and gains under Section 44ADA (which prescribes presumptive taxation for professionals), and they claim income lower than the deemed profits, audit becomes mandatory.
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Section 44AB:
- This section deals with tax audit and applies to specific categories of taxpayers.
- Under clause (d) of Section 44AB:
- Professionals who fall under the provisions of Section 44ADA (presumptive taxation) and claim income lower than the deemed profits must maintain books of accounts.
- If their income exceeds the maximum non-taxable amount, they are required to get these accounts audited.
- Under clause (e) of Section 44AB:
- Businesses are subject to audit if the provisions of Section 44AD apply to them.
- Section 44AD provides for presumptive taxation for businesses.
- If a business’s income exceeds the maximum non-taxable amount, audit becomes mandatory.
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Section 44AD:
- This section deals with presumptive taxation for businesses.
- Eligible taxpayers can declare profits based on a presumed percentage of their gross receipts.
- However, if they declare profits differently from the prescribed percentage for five consecutive assessment years, they lose eligibility for this section.
- If an eligible taxpayer’s income exceeds the maximum non-taxable amount, they must maintain books of accounts and get them audited under Section 44AB.
In summary, tax audit is a process of verifying and inspecting a taxpayer’s accounts to ensure compliance with the Income Tax Act.