Last updated on September 4th, 2022 at 04:13 pm
Applicability of Tax Audit
When tax audit will be mandatory for a person deriving income from a business?
Section 44AB(a) – If the total sales from a business exceed Rs 1 Crore in a financial year then the tax audit will be mandatory.
Proviso to section 44AB(a) – The above limit of turnover for tax audit becomes Rs 10 crores instead of Rs 1 crore if the aggregate of cash receipts and cash payments does not exceed 5% of the total receipts & payments during the financial year.
Section 44AB(e) – If the total sales is up to Rs 2 Crores in a financial year BUT the actual profit/income is less than the deemed profit i.e 8%/6% of the total sales then the tax audit will be mandatory. [Total income exceeds the basic exemption limit]
When tax audit will NOT be mandatory for a person deriving income from a business?
Section 44AB(a) – If the total sales from a business does not exceed Rs 1 Crore in a financial year then the tax audit will not be applicable.
Section 44AD(1) – If the total sales is up to Rs 2 Crores in a financial year AND the assessee declares income equal to or more than deemed profit i.e. 8%/6% of the total sales under presumptive taxation then the tax audit will not be applicable.
When tax audit will be mandatory for a person deriving income from a profession?
Section 44AB(b) – If the gross receipts from the profession is more than Rs 50 lakhs in a financial year then the tax audit will be mandatory. [Irrespective of % of earnings]
Section 44AB(d) – If the gross receipts from the profession is up to Rs 50 lakhs in a financial year BUT the actual income is less than 50% of gross receipts then the tax audit will be mandatory. [Total income exceeds the basic exemption limit]
When tax audit will not be mandatory for a person deriving income from a profession?
Section 44ADA(1) – If the gross receipts from the profession is up to Rs 50 lakhs in the financial year AND the assessee declares income equal to 50% or more of gross receipts under presumptive taxation then a tax audit will not be applicable.
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There is a slight error .. cash payments/receipts are to be seen as percentage of total payments/receipts and not on sales or turnover
Oh yes. Thanks for drawing our attention. I will correct the error on the backend.