Tax audit requirement

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

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