Tax audit liablity

Only if his total income is above BEL.

Income Tax Act mandates professionals and businesses to obtain a tax audit from a Chartered Accountant and maintain accounts if the turnover or profit exceeds a certain amount. In this article, we look at the tax audit limit and accounts maintenance limit for businesses under the Income Tax Act.

Tax Audit Limit – Section 44AB

if a business has total sales turnover or over Rs.1 crore. In case of a profession, if the profession has total gross receipts of more than Rs.50 lakhs, then tax audit by a Chartered Accountant is mandatory.

In addition to the above limits based on the business turnover, businesses covered under section 44AD, 44AE, 44BB or 44BBB and claiming income to be lower than the deemed profits as specified under respective sections is also required to obtain tax audit mandatorily.

Rule 6F of Income Tax – List of Books and Accounts to be Maintained

The following books and accounts must be maintained by all professions and businesses mandatorily if they cross a threshold specified under Income Tax Act.

1. A cash book (i.e., a record of all cash receipts and payments, kept and maintained from day-to-day giving the cash balance in hand of each day or at the end of a specified period not exceeding a month).
2. A journal, in case of mercantile system.
3. A ledger.
4. Carbon copies of bills (whether machine numbered or otherwise serially numbered) exceeding Rs. 25 issued by the person and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by the person.
5. Original bills/receipts issued to him in respect of expenditure (payment vouchers if bills/receipts are not issued and amount of expenditure does not exceed Rs. 50).

In addition to above, a person engaged in medical profession (i.e., a practitioner of any system of medicine – physicians, surgeons, dentists, pathologists, radiologists, vaids, hakims, etc.) has to maintain following items:

• A daily case register in prescribed form (i.e. Form 3C), showing date, patient’s name, nature of professional services rendered (i.e., general consultation, surgery, injection, visit, etc.,) fees received and date of receipt; and
• An inventory under broad heads, as on the first and last day of the previous year, of the stock of drugs, medicines and other consumable accessories used for the purpose of his profession.