Urgent income tax query

Vaibhav according to Sec44AD of Income Tax Act tax audit does not required for the assessee. Because turnover i.e sale is 45,00,000/- & profit is 1,80,000/-. It means sale is below 60,00,000/- & profit is more 8% then tax audit does not required.

Sec 44AD of Income Tax Act says-

1) The scheme laid down in the said sec 44AD is optional.

2) The scheme is applicable for any business (except the business of plying,hiring or leasing goods carriage) whose total turnover or gross receipts in the previous year does not exceed Rs 60,00,000/-.

3) The profits and gains from the business referred to in (2) above shall be deemed to be 8% of the total turnover or gross receipts of the assessee in the previous year or a higher sum as may be declared by the assessee and the said deemed income is chargeable to tax under the head "Profits & gains of buiness or profession".

If books of accounts are maintained by the assessee in that case assessee have to file his return in ITR 4 otherwise in ITR 4S i.e under presumtive scheme that books are not maintained by the assessee.

Dear Aksh*t

There are 2 conditions for audit U/S 44AD :-

First condition is that the assessee claims his profit to be less than 8 %.

Second condition is that his total income should exceed the maximum amount which is not chargeable to tax.

80 C deduction revised figure Rs 50,000 (earlier 20,000)

Now in my case the first condition is satisfied but the second condition is not satisfied because total taxable income comes to 180000+100000-50000=230000 which is less than the exemption limit of Rs 250000 for senior citizen.

@ Vaibhav

without any 2nd thought audit is required unless the assesee taxable income from business and profession exceeds 8% ( in your case 3.6 Lacs is mark pont)

@ Barish 

1.8 Lacs is only 4% of the taxable income for 45 lacs which does not confirms the requirements under sec 44AD, hence 44AB comes in picture for compulsary audit requirements.

U S Sharma

Please explain about the second condition which I mentioned to Aksh*t

2nd condition is also true, and as no tax is payable after computation, the audit will get exempted, however to maintain the status the assesee will have to ensure that nothing is escaped to avoid the audit, as if the case is selected for regular assessment, then troubles may arise including audit.

So we can conclude that even if profit is less than 8 % , audit is not compulsory based on the condition of "taxable income below exemption limit".

audit is compulsory

As per Subsection (5) of Section 44AD 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.

1. Profits specified in Subsection (1) of 44AD is Rs.3,60,000 (Rs.45,00,000 * 8%)

declared profit is 1,80,000 which is lower than the profit specified as per Sec 44AD(1)

2. Total Income: 1,80,000 + 1,00,000 = 2,80,000 (For computing the total income we should consider only the gross total income and not the Taxable income i.e Rs. 2,30,000)

Total income is higher than the maximum amount that is not chargeble to income tax i.e 2,50,000

Thus the assesse is subject to Tax Audit.

Dear Dinesh Total Income is after deductions i.e 230000

Sidhant saha please support your answer with reason