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Tax audit requirement for individuals

Pradeep Kumar (24 Points)

23 May 2021

I am a working professional with regular income.

I am also an investor in the equities and have both short and long term capital gains (both shares and mutual funds).

I would like to understand circumstances under which it becomes mandatory for me to do the tax audit.

Would it depend upon my overall trade volume or overall profit of the FY?

On the net I read it as "Total gross receipts exceed Rs 50 lakh in the FY". What does receipts mean here?

Appreciate your response.

Thanks, Pradeep

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4 Replies

CA. Sourav Sarkar (Chartered Accountant ) (24578 Points)
Replied 23 May 2021

If your income exceeds 250000 rupees in the year then you're liable for income tax. But as you are trading in shares you should file ITR. Total gross receipts limit is for maintaining of books of accounts

Jay Chichani (131 Points)
Replied 24 May 2021

Since You are Profession come under below category then they are treated as Professional

Professionals engaged in the following professions are eligible:

Interior decorations

Technical consulting

Engineering

Accounting

Legal

Medical

Architecture

Other professionals, as mentioned below:

Movie artists includes a producer, editor, actor, director, music director, art director, dance director, cameraman, singer, lyricist, story writer, screenplay or dialogue writer and costume designers

Authorised representative means a person who represents another person for a fee before a tribunal or any authority constituted under any law. It does not include an employee of the person so represented or a person who is carrying on the profession of accountancy

Any other notified professionals

If you can't show 50 % Income as PGBP then Rs 50 lacs is TAX AUDIT limit u/s 44AB but if you are showing that you have only earn receipt by Electronic mode prescribed then

Union Budget 2021 Outcome:

The threshold limit of tax audit for businesses is extended from Rs. 5 crores to Rs. 10 crore w.e.f. A.Y. 2021-22 where digital transactions are not less than 95 per cent of total transactions.

Equity Trading Income depends on your frequency of transaction then if you treat Equity Shares as Stock then it is your PGBP Income and if you treat as investment then Income under head Capital Gain

Sivaramaraju G (Learner) (2398 Points)
Replied 24 May 2021

As you are saying you are doing profession but did not mention the profession in the question. and saying your gross receipts are more than 50 Lakhs.

i am assuming that you are specified professional as mentioned above by @ Jaychichani i.e. specified professional as per sec 44AA but your gross receipts exceeds 50Lakhs so you can't go with 44ADA to show 50% of Gross receipts as your business income to escape audit.

As your gross receipts exceeds 50L you have to go for audit as per sec 44AB.

Gross Receipts mean the amount you charges to your clients for providing services. nothing but sum of your issued bills to your clients.

and you are saying you are investor in equities that means if any gain/loss loss arises it will come under capital gains.

but if you are regular trader then it will come under business.