Tax audit requirement

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Saurabh Nene

Manager (Accounts & Taxation)

23 Points Posted on 30 August 2016

1. Asssessee has received interest on capital from partnership firms. (As per section 40(b))

2. Interest on loan, given to partnership firms in which he is a partner.

Assessee has offerred all the interest as busines income.

Situation-1:- Interest on Loan exceeds Rs. 1 crore. Will tax audit be applicable in that case?

Situation-2:- Interest on loan does not exceed 1 crore, but total interest on capital + loan exceeds 1 crore , will tax audit be applicable?

Please help.

Replies (2)

Naveen

student

42 Points Posted on 31 August 2016

Interest on loans is not a business income, it comes under income from other sources and will be taxed in the hands of partner. As it comes under income from other sources tax audit is not applicable

ajay

Student

152 Points Posted on 31 August 2016

Dear Saurabh,

As per section 28, any interest, salary, bonus, commission or remuneration by whatever name called due to or received by a partner of firm from firm to the extent allowed under section 40(b) will be treated as PGBP

As per section 44AB if gross receipts or turnover from business exceeds 1 crore then his accounts are required to be audited.

So by combining both the above provisions if interest amount exceeds 1 crore and it is allowed under 40(b) then audit has to be done under section 44AB

Note: Here interest means both interest on capital and interest on loan