Sec 44ad: profits lower than 8%

Hello everyone
 
An assessee who claims lower % of profit is required to get his book audited if his "total income" exceeds basic exemption limit. 
What is meant by total income? Is it inclusive of income declared from such business?
 
E.g. Income from other sources: 50,000 
Gross Receipts from business: 25,00,000
Profit as per books Rs 1,25,000 ( 5%).
Will this person be required to get his books audited?
Replies (8)

yes, it is inclusive of the income declared.

 

and the person is required to get his books of account audited as per the provisions of section 44ad and 44ab.

Dear Abhinav,

yes, the said amount of profit from business (Rs. 125000) is included in the total income for the purpose of determining tax audit liability, but in your case, the said amount combined with income from other sources would come out to Rs. 175000..... and this is not exceeding the basic exemption limit. However, if you took that figures, just for example purpose, ignoring the basic exemption limit amount, then it's OK.

 

Best Regards,
CA Lovely Arora
ca.lovelyarora @ gmail.com

hey abhinav books are required to be audited in this case, coz you are showing profit less than 8% and it will not be covered u.s 44AD. you have to declare profit atleast 8% excluding income from other sources

Yes if net profit is lower than 8% of sales or total turnover exceed ₹ 1 cr. then books of account should be audited under section 44 AD.

Dear all

Please reply specific to my example. The total income is less than the basic exemption limit. so I think audit should not be applicable. 

Dear Abhinav,

that's what i replied before... that according to your specific example.. you are not liable for tax audit...

since your total income including business income does not exceeds the maximum amount not chargeable to tax, you are not required to get ur accounts audited as per the provisions of section 44AD.
You are liable for tax audit because you are showing profit less than 8%

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