Who is covered by tax audit ?
FAQ deals with Income Tax Audit Provisions in India. As per section 44AB, following persons are compulsorily required to get their accounts audited:-
- A person carrying on business, if his Gross/total sales, turnover or gross receipts (as the case may be) in business for the year exceed or exceeds Rs. 1 crore. This provision is not applicable to the person, who opts for presumptive taxation scheme under section 44AD and his Gross sales or turnover doesn’t exceeds Rs. 2 crores.
- A person carrying on profession, if his Gross/total receipts in profession for the year exceed Rs. 50 lakhs.
- A person who is eligible to opt for the presumptive taxation scheme of section 44AD (*) but claims the profits or gains for such business to be lower than the profits and gains computed as per the presumptive taxation scheme of section 44AD and his income exceeds the amount which is not chargeable to tax.
- If an eligible assesses opts out of the presumptive taxation scheme, after specified period, he cannot choose to revert back to the presumptive taxation scheme for a period of five assessment years thereafter.
- For provisions of section 44AD refer tutorial on “Tax on presumptive basis in case of certain eligible business”.
- A person who is eligible to opt for the presumptive taxation scheme of section 44ADA (*) but he claims the profits or gains for such profession to be lower than the profit and gains computed as per the presumptive taxation scheme and his income exceeds the amount which is not chargeable to tax.
- A This provision is not applicable to the person, who opts for presumptive taxation scheme under section 44AD and his Gross/total sales or turnover doesn’t exceeds Rs. 2 crores.
For provision of section 44ADA, refer tutorial on “Tax on presumptive basis in case of certain eligible business”
- A person who is eligible to opt for the presumptive taxation scheme of section 44AE (*) but he claims the profits or gains for such business to be lower than the profits and gains computed as per the presumptive taxation scheme of section 44AE.
For provisions of section 44AE refer tutorial on “Tax on presumptive basis in case of certain eligible business”.
- A person who is eligible to opt for the taxation scheme prescribed under section 44BB (*) or section 44BBB (*) but he claims the profits or gains for such business to be lower than the profits and gains computed as per the taxation scheme of these sections.
section 44BB is applicable to non-resident taxpayers engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire basis to be used in exploration of mineral oils. Section 44BBB is applicable to foreign companies engaged in the business of civil construction or erection of plant or machinery or testing or commissioning thereof, in connection with a turnkey power project.
Section 44AB of income tax applicable to only business Income
Section 44AB of income tax provisions are applicable only in the case of business/profession income. It is not applicable in respect of other incomes of assessee-Thai Constructions v. State of Maharashtra[2009] 184 Taxman 52 (Bom.).
Work-in progress does not constitute ‘Turnover/Gross sales’ within the meaning of section 44AB of Income tax
Value of work in progress in case of the assessee engaged in construction of flats/shop would not constitute ‘turnover’ within the meaning of section 44AB of Income tax-CIT v B.K Jhala & Associates [1999] 69 ITD 141 (Pune).
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