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Help ! a/c entry

Deepak sharma (Learner) (1431 Points)

27 August 2014

Hello All,

A client having following statistics for the year ending 31/03/2014, and for the same owner dont want to audit their accounts as well as agree to file return on 8% of total turnover, Please let me know what will be the entry to adjust Expense of Rs 258000.00 in P&L to make our profit as per Income tax return.,

Statistics are as follows :-

Particulars	31/03/2014
Turnover	6,600,000.00
GP (as per Inventory)	995,000.00
Less: Indirect Expenses	725,000.00	as per books
Net Profit As Per Books	270,000.00
Should be for unaudited	528,000.00	@ 8%
Difference(NetProfit)	(258,000.00)

Thanks in advance,

Regards

Deepak Sharma

deepak_8583 @ yahoo.com

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16 Replies

Pankaj (Student CA Final ) (52 Points)
Replied 27 August 2014

You dont have to match your book profit with Income Tax profit. Profit as per books & as per Income Tax are two different things. Income Tax profit is just for calculating tax liability. So, no accounting entry would be require to pass in the books.

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Ashish Tewani (CA Final Article at V.P. Mehta & Co.) (83 Points)
Replied 27 August 2014

Situation 1: Your client opts for Audit. Net profit upon which he has to pay tax would be around Rs. 2,20,000 (after deduction Rs. 50,000 Audit Fess aprrox.).

Situation 2: He opts for 8 % of Turnover. Now, he has to pay tax upon profit of Rs. 5,28,000; which means obviously Income Tax department is getting more tax than Situation 1; so no need to pass any entry for the difference. Income Tax department will be happy if he opts Situation 2. :D

Deepak sharma (Learner) (1431 Points)
Replied 27 August 2014

Thanks Both @ MrPankaj & @ MrAshish,

It means we need to file Income Tax Return u/s 44AD in Form 4S (Sugam),

or there is any possibility to file Return in Form4

Please correct me,

Thanks

Pankaj (Student CA Final ) (52 Points)
Replied 27 August 2014

You may file Income Tax return in any of the form. The only difference is, in Form 4S you don't have to submit balance sheet & P & L a/c.

CA Sanket Gujar (Professional) (74 Points)
Replied 27 August 2014

It would be better if u do Tax audit

There is no need to make any accounting entry if u file ITR4S

In case of ITR4 make a provision for current tax

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Deepak sharma (Learner) (1431 Points)
Replied 27 August 2014

Dear Sanket,

I wish to file Form4

Please let me know the desired A/c entry

Thanking You,

CA Raj Doshi (Practising CA) (8924 Points)
Replied 28 August 2014

TAX AUDIT WOULD BE BENEFICIAL. YOU WILL SAVE ON TAX of Rs. 35600 AND YOU WILL HAVE A TRUE AND FAIR BALANCE SHEET AND P/L.RATHER PAY TAX AUDIT FEES TO THE EXTENT OF YOUR SAVINGS IN TAX OF RS.35600 AND BENEFIT YOURSELF.

CA Raj Doshi (Practising CA) (8924 Points)
Replied 28 August 2014

THE PROFIT % IS TOO LOW. SO YOU MAY CONSULT THE MANAGEMENT FOR THE SAME.

Deepak sharma (Learner) (1431 Points)
Replied 28 August 2014

Thank you all for your valuable advise :)

satish kumar Chauhan (accountant) (347 Points)
Replied 28 August 2014

Dear Deepak

If you show book profit less than 8% on gross receiopt ( up to 1.00 crore), than tax audit is compulsory so you can't file ITR U/s 44 D.

In your case ITR can't be file U/s 44AD

Thanks

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satish kumar Chauhan (accountant) (347 Points)
Replied 28 August 2014

Dear Deepak

If you show book profit less than 8% on gross receiopt ( up to 1.00 crore), than tax audit is compulsory so you can't file ITR U/s 44 D.

In your case ITR can't be file U/s 44AD

Thanks

Deepak sharma (Learner) (1431 Points)
Replied 28 August 2014

Dear Satish Sir,

Thanks for your reply, But if you noticed i already mentioned the Gross Receipts (66Lcs) in my Query,

Regards

Deepak Sharma

satish kumar Chauhan (accountant) (347 Points)
Replied 29 August 2014

If you file ITR U/s 44AD, you have to show minimum 8 % Book profit i.e. Rs. 528000/-( 8% of 6600000/-), if book profit less than Rs. 528000/- than tax audit will be compulsory

Thanks