09 August 2022
One of our client is running a gaushala and is registered under Sec 12A and 80G there receipts are approx 1.5 crores I want to ask do they have to go for tax audit if they show there profit below 8 %. Or they are governed by sec 11,12 and 13 and not liable to tax audit
11 July 2024
If your client's gaushala is registered under Section 12A and 80G of the Income Tax Act, it implies that they are considered a charitable institution or trust. Here are the relevant points to consider regarding tax audit requirements:
1. **Tax Audit Requirement for Charitable Trusts:** - Charitable trusts or institutions are generally governed by Sections 11, 12, and 13 of the Income Tax Act. These sections deal with exemptions and conditions for income derived from property held for charitable or religious purposes. - As per Section 11(1)(a), income derived from property held under trust is exempt from tax if it is applied for charitable or religious purposes in India. - However, under Section 11(4A), if the income of the trust or institution (other than agricultural income and income exempt under Sections 11 and 12) exceeds the maximum amount not chargeable to tax in any previous year, it is required to be computed in accordance with Sections 11 and 12 and comply with the provisions of Section 44AB (which pertains to tax audit).
2. **Threshold for Tax Audit:** - The threshold for tax audit under Section 44AB for charitable trusts is different from that for businesses. For charitable trusts, a tax audit is required if their total income (excluding income exempt under Sections 11 and 12) exceeds the maximum amount not chargeable to tax in any previous year. For the assessment year 2023-24 (financial year 2022-23), this amount is Rs. 2,50,000.
3. **Applicability of Tax Audit if Profit is Below 8%:** - The 8% profit margin rule (Section 44AD) applies specifically to businesses. Charitable trusts are assessed based on their total income and the application of income for charitable purposes. - Even if the trust shows profit below 8%, if their total income (excluding exempt income) exceeds Rs. 2,50,000, they would be required to undergo a tax audit under Section 44AB.
4. **Conclusion:** - Based on the information provided, if your client's gaushala has total income (excluding income exempt under Sections 11 and 12) exceeding Rs. 2,50,000, they would need to undergo a tax audit under Section 44AB. - It's important for them to maintain proper books of accounts and ensure compliance with the provisions of the Income Tax Act, including filing of returns and audit reports within the prescribed due dates.
Given the complexity and specific nature of tax laws, it's advisable for your client to consult a qualified chartered accountant or tax advisor who can provide tailored advice based on their financial statements and other relevant details.
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