Is it a 44ab case?

This query is : Resolved

Dinakar C Korishettar (Querist)
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23 July 2013 Is it a 44AB case?

Please guide me,

1) Whether a Tax Consultant can file ITR4 for this A.Y 2013-14, if…
Assessee is an individual or HUF, having…
a) Total business turnover less than 1 Crore,
b) Maintains his books of accounts regularly.
c) Profits & gains from the business are not more than 8% of his total turnover.
d) Net profit from the business is bellow basic maximum income tax exemption limit, i.e., Rs 2 Lakh and
e) Agricultural Income is more than Rs 5 lakhs.

2) Whether an assesse or a Tax Consultant can file ITR5 for this A.Y 2013-14, if…
Assessee is a partnership firm, having…
a) Total business turnover less than 1 Crore,
b) Maintains his books of accounts regularly.
c) Profits & gains from the business are not more than 8% of his total turnover.
d) Net profit from the business is bellow basic maximum income tax exemption limit, i.e., Rs 0 and
e) Agricultural Income is more than Rs 5 lakhs.

Thanks with regards,
Dinakar C Korishettar.

CA Kapil Verma

CA Kapil Verma (Expert)
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23 July 2013 audit will be applicable in both of the cases as profit is less than 8% and gross taxable income exceed basic exemption limit.

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Dinakar C Korishettar

Dinakar C Korishettar (Querist)
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23 July 2013 Thanks for your kind reply sir.

You have ascertained that one should consider his gross taxable income.

But under clause (d) of section 44AB, it is given as...

44AB. Every person,—
[(d) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AD and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,]
get his accounts of such previous year 67[***] audited by an accountant before the specified date...

Here instead of the word "gross taxable income" the word only "income" is written.

So

Whether assessee should take Agricultural income for this or not?

And

Scenario 1.

If agricultural income for this AY 13-14 is bellow Rs 2 Lakh.

Scenario 2.

If there is no any income other than above stated business income.

then what will be the effect.

Kindly guide me sir.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 Under Section 44AB of the Income Tax Act, the requirement for audit and the consideration of income types such as agricultural income have specific implications. Let’s break down the scenarios and provide guidance based on the provided sections and conditions.

### **Section 44AB Overview:**

**Section 44AB** mandates that every person carrying on a business or profession must get their accounts audited if:
1. The profits and gains from the business are deemed under Section 44AD (presumptive taxation scheme).
2. The income claimed by the assessee is lower than the presumptive income.
3. The total income exceeds the basic exemption limit (i.e., the amount not chargeable to tax).

### **Agricultural Income Consideration:**

1. **Agricultural Income Below ₹2 Lakh (Scenario 1):**
- **Impact on Audit Requirement:**
- Agricultural income is not included in the computation for determining whether the total income exceeds the basic exemption limit for audit under Section 44AB.
- If the business income alone exceeds the basic exemption limit, the audit requirement under Section 44AB will still apply, regardless of the agricultural income.

2. **No Other Income Except Business Income (Scenario 2):**
- **Impact on Audit Requirement:**
- If the total business income is below the basic exemption limit and no other income is considered (including agricultural income), then the audit requirement under Section 44AB may not apply.
- The critical point is whether the business income alone exceeds the exemption limit or not.

### **Filing ITR4 (Individual or HUF):**

For AY 2013-14, if an individual or HUF has:
1. **Business Turnover Less Than ₹1 Crore:**
- They can file ITR-4, even if the profits are less than 8% of turnover.

2. **Books of Accounts Maintained Regularly:**
- Proper bookkeeping is maintained.

3. **Net Profit Below ₹2 Lakh:**
- The exemption limit is considered, but agricultural income does not impact the audit requirement under Section 44AB.

4. **Agricultural Income Above ₹5 Lakh:**
- Agricultural income is not considered for tax audit requirements under Section 44AB. However, it needs to be disclosed as exempt income in the tax return.

### **Filing ITR5 (Partnership Firm):**

For AY 2013-14, if a partnership firm has:
1. **Business Turnover Less Than ₹1 Crore:**
- The firm can file ITR-5 if it maintains books of accounts regularly.

2. **Net Profit Below ₹2 Lakh:**
- If the net profit is below ₹2 lakh but turnover is above ₹1 crore or if the firm claims lower profits than deemed under Section 44AD, the audit requirement could still apply if the income exceeds the basic exemption limit.

3. **Agricultural Income Above ₹5 Lakh:**
- For a firm, agricultural income does not impact the audit requirement under Section 44AB.

### **Summary:**

1. **For Individual or HUF Filing ITR4:**
- If business income is below ₹2 lakh, agricultural income does not affect audit requirements but must be disclosed as exempt income.

2. **For Partnership Firm Filing ITR5:**
- Agricultural income does not affect audit requirements under Section 44AB. Audit is required if the business turnover exceeds ₹1 crore or if profits are below the deemed 8% under Section 44AD but total income exceeds the exemption limit.

In all cases, it's essential to accurately report all types of income and comply with the provisions of the Income Tax Act. For specific guidance, especially with complex scenarios, consulting a tax professional is advisable.