11 March 2016
My Clients are Co-operative credit societies whose business is accepting deposits and lending to members. My query is what constitute the turnover for the purpose of tax audit u/s 44AB. Is it the total deposits accepted or total advances made? Or is it the interest income only? Or is it the difference between income earned and expended? Experts please advise.
11 March 2016
Total turnover is Gross Receipts including of Tax , Advances /Deposits or Interest is not form part of Turnover. but in Bank audit is done Basis of Advances.(Statutory branch audit of PSBs may be carried out for all branches with advances of ₹ 20 crore)
24 July 2024
Section 44AB of the Income Tax Act, 1961, pertains to the provisions for tax audit. The term "gross receipts in business" mentioned in this section refers to the total sales turnover or gross receipts of the business during the financial year.
Here's a detailed explanation:
1. **Definition**: Gross receipts in business include all receipts from the business carried on by the taxpayer during the financial year. It encompasses the total amount received by the taxpayer from the sale of goods, services rendered, or any other income derived from the business operations.
2. **Inclusions**: - **Sales Turnover**: It includes the total sales made by the business during the year, whether in cash or credit. - **Service Receipts**: Receipts from services rendered by the business, including professional fees, consultancy charges, etc. - **Other Business Income**: Any other income directly related to the business activities, such as interest on business investments, rent from business property, etc. - **Exports and Domestic Sales**: Both domestic sales within India and exports, if applicable, are considered in determining the gross receipts.
3. **Exclusions**: - **Capital Receipts**: Receipts that are of a capital nature, such as proceeds from sale of fixed assets, gifts, loans, etc., are generally not included in gross receipts for tax audit purposes. - **Taxable Services**: If the taxpayer is engaged in providing taxable services under the service tax laws, the gross receipts include the total amount charged for taxable services provided.
4. **Threshold for Tax Audit**: Section 44AB mandates tax audit if the gross receipts of the business exceed the specified threshold limits. As of the latest information: - For businesses carrying on profession: Tax audit is mandatory if gross receipts exceed ₹50 lakhs in a financial year. - For businesses other than profession: Tax audit is mandatory if gross receipts exceed ₹1 crore in a financial year.
In summary, "gross receipts in business" under Section 44AB refers to the total income earned by the taxpayer from the business or profession during the financial year, excluding capital receipts. It is crucial for determining whether a taxpayer is liable for a tax audit under the Income Tax Act.
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