09 June 2016
WE ARE FIRM OF TWO PARTNERS, DUE TO SOME CIRCUMSTANCES, OUR P/L IS SHOWING A LOSS OF 132000/-. CAN SOMEONE SUGGEST ME WHETHER IN THIS CASE A TAX AUDIT U/S 44AB IS REQUIRED OR NOT??
10 June 2016
Tax Audit u/s 44AB does not depend upon profit or loss in P&L whereas it depends upon turnover during the year, whether profit is lower than 8% under section 44AD of the Income Tax Act, 1961.
03 August 2024
The requirement for a tax audit under Section 44AB of the Income Tax Act is based on several criteria. For a partnership firm, the key considerations are:
### **Tax Audit Requirements under Section 44AB:**
1. **Turnover Threshold:** - If the **turnover** of the partnership firm exceeds ₹1 crore in a financial year, a tax audit under Section 44AB is mandatory, regardless of whether the firm shows a profit or a loss.
2. **Presumptive Income:** - If the partnership firm is claiming presumptive taxation under Section 44AD or 44AE, the audit requirements and thresholds might be different.
3. **Loss Scenario:** - If the firm’s turnover is below ₹1 crore and it shows a loss, a tax audit is generally not required. However, if the firm has opted for presumptive taxation under Section 44AD, then the audit requirement would apply even if there is a loss.
### **Determining Your Situation:**
Based on the information provided:
1. **Turnover Below ₹1 Crore:** - If your firm's turnover is less than ₹1 crore and you are not claiming presumptive taxation under Section 44AD or 44AE, you are **not required** to undergo a tax audit under Section 44AB.
2. **Turnover Above ₹1 Crore:** - If your firm’s turnover exceeds ₹1 crore, a tax audit is mandatory regardless of the profit or loss situation.
3. **Presumptive Taxation:** - If the firm is covered under presumptive taxation schemes (e.g., Section 44AD), the audit requirement would be applicable even in case of a loss.
### **Conclusion:**
If your firm's turnover is below ₹1 crore and you are not covered under presumptive taxation schemes, you are **not required** to have a tax audit under Section 44AB.
However, it’s always good practice to consult with a tax professional or accountant to confirm your specific situation and ensure compliance with all applicable regulations.
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