Is Tax Audit Compulsory u/s 44AB for ? Lets find out…

All about Section 44AB 

Is Tax Audit Compulsory u/s 44AB to All ?

No.

Audit is only for those whose

1. Turnover greater than equal to 60 Lakh – (Audit Compulsory)

2. Turnover less than 60 Lakh

a) Assessee showing Net Profit Greater than equal to 8% of turnover - No need of tax audit. For e.g. 1.65 Lakh Net Profit if Turnover is 20 Lakh (Tax Audit Compulsory)

b) Net Profit less than 8% of Turnover - Tax Audit Compulsory

c) Net Profit less than 8% of Turnover and Total Income Below Taxable Limit ( Tax Audit Not required )

Turnover/Sales may be calculated considering

1. Cash discount otherwise than that allowed in a cash memo/sales invoice is in the nature of a financing charge and is not related to turnover. Hence the same should not be deducted from the figure of turnover.

2.Discount allowed in the sales Invoice will be deducted from the turnover.

3. Turnover discount is allowed to a customer if the sales made to him exceed a particular quantity. This being dependent on the turnover and hence should be deducted from the figure of turnover even if the same is allowed at periodical intervals by separate credit notes.

4. Special rebate allowed to a customer can be deducted from the sales if it is in the nature of trade discount.

5. If Special rebate is in the nature of commission on sales, the same cannot be deducted from the figure of turnover.

6. Sales Return should be deducted from the figure of turnover

7. Sale proceeds of fixed assets would not form part of turnover . Sale proceeds of property held as investment property will not form part of turnover.

8. Sale proceeds of any shares, securities, debentures, etc., held as investment will not form part of turnover.

9. Shares, securities, debentures etc., which are held as stock-in-trade, the sale proceeds thereof will form part of turnover.

10. Sales by a commission agent or by a person on consignment basis forms part of the turnover of the commission agent and/or consignee as the case may be. In such cases, it will be necessary to find out, whether the property in the goods or all significant risks, reward of ownership of goods belongs to the commission agent or the consignee immediately before the transfer by him to third person. If the property in the goods or all significant risks and rewards of ownership of goods continue to belong to the principal, the relevant sale price shall not form part of the sales/turnover of the commission agent and/or the consignee as the case may be. If, however, the property in the goods, significant risks and reward of ownership belongs to the commission agent and/or the consignee, as the case may be, the sale price received/receivable by him shall form part of his sales/turnover.

11. In this context, it would be useful to refer to the CBDT Circular No.452 dated 17th March, 1986, where the Board has clarified the question of applicability of section 44AB in the cases of Commission Agents, Arhatias, etc.

12.  Share brokers, on purchasing securities on behalf of their customers, do not get them transferred in their names but deliver them to the customers who get them transferred in their names. The same is true in case of sales also. The share broker holds the delivery merely on behalf of his customer. The property in goods does not get transferred to the share brokers. Only brokerage which is being accounted for in the books of account of share brokers should be taken into account for considering the limits for the purpose of section 44AB. However, in case of transactions entered into by share broker on his personal account, the sale value should also be taken into account for considering the limit for the purpose of section 44AB. The case of a sub-broker is not different from that of a share broker.

Comments (5)

  • NAVEEN SWAMI said: Jul-30th-2011

    Really Helpful

    THANKS

  • Manoj kumar said: Sep-20th-2011

    Plz tell whether Tax Audit is required for the people whose income are exempt from tax?

    Like u/s 10(26) income of Tribal people are exempt from tax

    One of friend is tribal, his gross receipts exceeds Rs. 70 lacs, he does not maintain books of accounts so Audit cannot be done,

    Now if he submit the return( For claiming Refund) without doing the Audit which penalty will arise i.e for Non maintanence of books of accounts or for not conducting audit

    Plz reply

  • NIlesh C. Bhatt said: Mar-3rd-2012

    Is Tax Audit Compulsory for Trust?

  • dev said: Apr-26th-2012

    my friend is advocate his income is above then 20,000,00. then aduit is compulsory or not. should accounting report keeping or not.
    whome is auditing compulsory ?
    in case of bussiness
    in case of profesion

  • Gautam Modi said: Oct-30th-2012

    Advocate is covered under the definition of Professional. As per A.Y.12-13 The limit for person engaged in profession for compulsory audit is when Gross Receipts exceeds Rs 25 lakhs.

    First u have to clarify whether it is income or gross receipts .
    If it is an income then u have to see what is the value of gross receipts and accordingly the above stated provision apply.

    Regards,
    Gautam

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