referring to the first question of mr sudhakar

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

provisions for ay 2017-18

finance act 2016 is applicable  and as per this  if business turnover exceeds rs 1 crore then tax audit under section 4AB(a) required.

and the second provision is that  tax audit under secition 44AB(e) required only when the  provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,

NOW MR SUDHAKAR , DO NOT CONFUSED WITH NUMEROUS REPLIES

you can decide on your own

i mean if you are not declaring your income under section 44AD that is provisions of section 44AD are not applicable in your case then only one clause left for your business tax audit and that is 44AB(a) which say for tax audit if business turnover exceeds 1 crore, simple

and in the present case your turnover is 1.5cr it means you will be liable to tax audit as per clause a of section 44AB of the income tax act 1961,

NOW COME ON SECOND OPTION 

if you are declaring your income under section 44AD then obvoiusly you can decalred because 44AD available with busness receipts upto 2 cr and since your business is having loss which means negative profit less than 8% and consequently you will be liable to tax audit under  clause e of section 44AB.

IF ANYBODY IS SAYING CONTRARY VIEW THEN PLEASE EXPLAIN WITH RELEVANT SECTION/LAW

Dear Priyam,

Guidance on 44AB, (refer page no 33)

which clearly states

From F.Y 2016-17

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.

that means if 2 conditions are fulfilled than Audit has to be done ..while people are interpriing as 2 conditions for applicablity of 44AD

Hence no Tax audit for loss. in above case

income includes loss

sorry i meant tax audit to be done..(mistakenly i added Not to it)

sorry i meant tax audit to be done..(mistakenly i added Not to it)

[Pardon my rephrasing on this, since there is an overlap of applicability of 44AB and 44AD in the range 1Cr to 2Cr]

This starts with choice of assesse: "44AB applies to a person who chooses not to specify income using 44AD."

38. Ins. by Act No. 7 of 2017, (w.e.f. 1-4-2017).

Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year:]

Once the assesse makes that choice and does not opt for 44AD, then 44AB (a) makes audit mandatory since the turnover is above 1Cr. 

What if the turnover of the partnership firm is less than 1cr ..say 80L and he incurs a loss of 5 lacs and does not opt for 44AD. Does the Tax audit apply?

no tax audit required if your other incomes after setting off the said business loss do not exceed max amount chargeable to tax

Originally posted by : neeraj gupta
	[Pardon my rephrasing on this, since there is an overlap of applicability of 44AB and 44AD in the range 1Cr to 2Cr] This starts with choice of assesse: "44AB applies to a person who chooses not to specify income using 44AD." 38. Ins. by Act No. 7 of 2017, (w.e.f. 1-4-2017). Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year:] Once the assesse makes that choice and does not opt for 44AD, then 44AB (a) makes audit mandatory since the turnover is above 1Cr.

that limit is now 2 crore

@ rohit Can you please tell which circular/notification has changed the limit mentioned in 44AB(a). I have pasted the 44AB(a) as mentioned in the Act as of now. 

The 44AD is the one which mentions about 2Cr. Once an assessee chooses not to use it then 44AB will apply to him. And if turnover is more than 1Cr then 44AB(a) to be exact.

44AB. 32Every person,—

 (a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year ; or

Originally posted by : neeraj gupta
	@ rohit Can you please tell which circular/notification has changed the limit mentioned in 44AB(a). I have not written my opinion there, I have pasted the 44AB(a) as mentioned in the Act as of now.  In case you want to give an opinion please back it by a fact. Here is the excerpt for your purusal, copied 1 min back. The 44AD is the one which mentions about 2Cr. Once an assessee chooses not to use it then 44AB will apply to him. And if turnover is more than 1Cr then 44AB(a) to be exact. 44AB. 32Every person,—  (a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year ; or

you are right i got confused with both the section.sorry

Originally posted by : neeraj gupta
	@ rohit Can you please tell which circular/notification has changed the limit mentioned in 44AB(a). I have not written my opinion there, I have pasted the 44AB(a) as mentioned in the Act as of now.  In case you want to give an opinion please back it by a fact. Here is the excerpt for your purusal, copied 1 min back. The 44AD is the one which mentions about 2Cr. Once an assessee chooses not to use it then 44AB will apply to him. And if turnover is more than 1Cr then 44AB(a) to be exact. 44AB. 32Every person,—  (a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year ; or

can u please clarify one more thing i have loss in future and option and my to is less than 1 cr.i want to carry forward the loss. do i need to get tax audit done.as per me no. but i found many people claiming it to be done as they are refering 44ad by interpreting loss to be "the income below specified limit".but as per me 44ad is optional and if i stay in 44ab only the tax audit criteria is only 1 crore.

Hey no problem Rohit. To be fair, the legislation of these two sections is inter-twined and could have been much better in my opinion.

To answer your question:

A business can be audited for three subsections 44AB(a) , (c), (e)  

[(b) and (d) apply to profession].

In FnO, if turnover is below 1 Cr then case 44AB(e) can become applicable if the total income (including all income heads) is above max exempted from tax.

Eg: For somebody (non Senior Citizen) with a Salary income > 2.5L having F&O losses will have to be audited under 44AB(e)

44AB.

:

37[(e) carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,]

CA sanket lalwani. great explanation :).

Thanks for sharing your knowledge!!