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Tax Audit for the a.y 17.-18

sudhakar (assistant) (29 Points)

11 June 2017

my individual business turnover is 1.5 crs and I incurred loss of 2lak. Will it attract tax Audit or not.

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48 Replies

CA Rashmi Gandhi (Chartered Accountant) (86220 Points)
Replied 11 June 2017

Yes same is required to be audited as profit is less than 8% of turnover.

CA Sarath R Krishnan (Chartered Accountant) (546 Points)
Replied 11 June 2017

No. Tax Audit (sec 44AB) doesn't attract in this case. As per section 44AD Income declared by the assessee is lower than the 8% and it exceeds the maximum amount not chargeable to tax (Basic exemption limit) then only tax audit attracts. In this case assessee incurs loss, so

Amit Agarwal (none) (96 Points)
Replied 11 June 2017

NO you don't have to get your account audited as your turnover is below 2cr u/s 44ab(a). further u/s 44ab(D) attract when your income is less Than 8% and is above maximum exemption, but in your case its loss.

sudhakar (assistant) (29 Points)
Replied 11 June 2017

if profit is more than 8% will it attract tax Audit

CA Rashmi Gandhi (Chartered Accountant) (86220 Points)
Replied 11 June 2017

You are takin wrong interprrtation of 44AD Amit Agarwal.

If income is less than 8% even if it is loss you are required to get audit.

1 Like

CA Rashmi Gandhi (Chartered Accountant) (86220 Points)
Replied 11 June 2017

No audit required if declared income 8% or more than 8%.

1 Like

CA Sarath R Krishnan (Chartered Accountant) (546 Points)
Replied 11 June 2017

Relevant point under section 44AD for clearing this doubt-Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.

2 Like

AMIT KUMAR (FDSRE) (22 Points)
Replied 11 June 2017

For your business you do not need to tax audit. The provision of tax audit are described as follows, please read it

Audit for Businesses

Starting financial year FY 2016-17 (income tax return filing for AY 2017-18), the turnover limit for businesses which can opt for presumptive income scheme has been increased from Rs 1 crore to Rs 2 crore. For financial year FY 2016-17, audit will apply for businesses with turnover in excess of 2 crore.

Audit for Professionals

Starting financial year FY 2016-17 (return filing for AY 2017-18), presumptive income scheme has been extended to professionals with receipts up to Rs 50 lakhs. Under this scheme, their income is assumed to be 50% of receipts. Books of accounts are not required to be maintained and audit is not applicable.

Starting financial year FY 2016-17, the turnover limit for audit for professionals continues to be 25lakhs. There is no amendment to Section 44AB. There is no change in audit requirement for professionals NOT covered under presumptive scheme.

Sanjay S (Chartered Accountant) (1375 Points)
Replied 11 June 2017

I agree with Ms. Rashmi Gandhi.

@ .Mr. Sarath... The text quoted by you..is from 44AD(5) which has been amended by FA,2016.

The amendments vide section 44AD(4) & (5) have been quite confusing when it comes to proprietorship businesses. These new subsections shall apply from AY 2017-18 onwards.

If one were to critically analyse those sections, it may be interpreted that the new section 44AD(4) applies only to such AY in which income declared is less than 8% (or 6%) of turnover; but in any prior AY (but starting from AY 2017-18) income had already been declared on presumptive basis.

Eg. Suppose you (an individual + business) having turnover of Rs.1.5 crore had declared income @ 8% u/s 44AD in AY 2017-18. Subsequently, in AY 2018-19, you incur a Loss of Rs. 2 lakhs. Now, if you want to claim the business loss in AY 2018-19, then only in such case, sec.44AD(4) applies (since you had already declared income as per s.44AD in AY 2017-18). Once section 44AD(4) is triggered, you will get a 6-year-effective ban on opting for s.44AD (ie., in AY 2018-19 + all 5 AYs upto AY 2023-24).

As per sec.44AB(e) read with s.44AD(4) +s.44AD(5), in the above example, you will not be liable for Tax Audit in AY 2018-19 eventhough you are declaring an income less than 8%, since the twin conditions in section 44AB(e) would not be satisfied (namely -- 44AD(4) should apply + income should exceed basic exemption limit). But for AY 2017-18, if you want to declare income below 8%, then Tax audit is to done. There's no option.

Hence, my answer to this thread would be that:

"For AY 2017-18, the assessee shall be liable to tax audit u/s 44AB if he wants to claim the loss of Rs.2Lakhs in his return. The new Section 44AD(4) and 44AD(5) shall not apply, if 44AD has not been opted in any prior AY (starting from AY 2017-18). If he doesn't want to do Tax Audit in AY 2017-18, then he may have to declare income @ 8% of turnover."

Please share your views on the above interpretation.

4 Like

Sudiesh (Audit Assistant) (527 Points)
Replied 11 June 2017

CA Revanth Bharathwaj M (Freelance consultant in Direct Tax and Financial Reporting) (373 Points)
Replied 12 June 2017

You need to get your accounts audited since the threshold for 44AB still stands at Rs. 1 Crore. Nevertheless your net loss, you need to be audited since the turnover is the only criterion.

kamlesh (Student) (78 Points)
Replied 12 June 2017

ye to be required for audit

Rashida Makda (Chartered Accountant) (39 Points)
Replied 12 June 2017

Yes, You require to get your accounts audited. As per amendment by Finance Act, 2016, if the turnover of the business is less then Rs. 2 Crore and you are a qualified assessee you can avoid audit by declaring 8% of turnover as profit. However assessee who declares profit less than 8% is suppose to get his accounts audited.