Section 44ab of income tax act 1961 is jargon of limits of turnover, one gets stuck into these tax audit limits while trying to ﬁnd the Tax audit applicability under sec 44ab of income tax act. To address this issue and quickly ﬁnd out status for tax audit u/s 44ab, we have made a tool for you which suggest whether tax audit is applicable on you or not, based on the information you enter.
Tax audit eligibility checker. (For AY 21-22 , AY2022-23 and onwards)
Here is a tax audit limits and provisions on which this tool is based.
Instead of juggling around the provisions, let us under the tax audit limits step by step.
Tax audit For businesses:
(1) if your turnover is more than 10 Crores, then you are liable to
get your books audited(under section 44ab(a))
(2) if your turnover is more than 2 Crores but upto 10 crores and any of the following conditions is not met, then you are liable for audit.
Conditions(proviso to sec 44ab)
(A) your cash receipts are not more than 5% of your total receipts
(B) your cash payments are not more than 5% of your total payments
(If both of these conditions are met then you are not liable for audit.)
(3) if your turnover is more than 1 cores but not more than 2 crores. Then check whether you are eligible for 44ad presumptive taxation scheme.
Qualiﬁcations for 44ad
(A) An individual/HUF
(B) A partnership ﬁrms(Not LLP)
(C) Who is a resident
(D) Who has not claimed deductions under section10A, section10AA, section 10B, and section 10BA and under heading C of chapter VIA
(E) Turnover is not more than 2 crores.
(F) business is
(i) Not covered under section 44AE(plying, hiring, leasing of goods carriages) Or (ii) Doesn’t involve a profession under section 44ad
(iii) doesn’t involve commission based or other agency business.
(G) Shows proﬁt at least the following amount.
Minimum proﬁt or income under sec 44ad = 6 % of turnover received in digitally + 8% of rest of the the turnover
((NOTE THAT THIS TAX AUDIT ELIGIBILITY TOOL ASSUMES THAT THE ASSESSEE QUALIFIES FOR REQUIREMENTS FROM (A) to (F))
So, if you qualify for the requirements under section 44ad, then audit is not required.
But, If you don’t qualify these requirements, then do the following,
Check whether you have opted for presumptive taxation scheme under 44ad in any of the previous 5 Assessment years.
If No, then audit status shall be determined as per point number (2) above.
If yes, then you have violated section 44ad(4) and because of this violation you will have to check the following. Whether your total income is more than the exemption limit.
If yes, then tax audit will be applicable under section 44ab(e) read with 44ad(5), (this is also known as 44ad audit)
But if no, then tax audit eligibility Shall be determined as per point number (2) above.
(4) if your turnover is less than 1 crores. Then you have to check whether you qualify for 44ad,
If yes, then No audit is required.
If No, audit is required under section 44ab(c)
(5) if you are eligible for presumptive tax scheme under section 44ae of income tax act
44ae eligibility provisions
(A) Any assessee who is engaged in the business of plying, hiring or leasing goods carriages
(B) owned only upto 10 goods carriages during the previous year.
(C) proﬁt is shown at least the following amount
Minimum proﬁt required under section 44ae = (i) + (ii)
(i) = Gross weight of heavy vehicle * 1000 * number of heavy vehicle * number of months they were owned by the assessee
(ii) = 7500 * number of light vehicle * number of months they were owned by the assessee.
Notes 1. part of the month will be considered as full month. ( i.e. 1 month 1 day = 2 months) 2. Heavy vehicle is a vehicle having weight more than 12 tons.
Tax audit of Professions:
(1) Gross receipts are more than 50 crores, Then tax audit is applicable.
(2) Gross receipts are less than 50crores, than check whether you are eligible for Presumptive taxation scheme under section 44ADA the following.
Eligibility for 44ADA
resident individual, Hindu Undivided Family (HUF)
a partnership firm, (other than LLP).
engaged in the following professions are eligible: Interior decorations
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
Any other notified professionals
Benefit of opting presumptive scheme under section 44AD,44ADA,44AE
Assessee is not required to maintain books of accounts under section 44AA.
No tax audit applicability under sec 44ab of income tax act is not applicable.
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