One friend of mine has turnover in his business is 80 lakhs in 2021-2022. He wants to show his profit at the rate of 5 % . This is his first year of business. Is he required for filling his income tax return under tax audit provision u/s 44AB or simply he would file his income tax return under normal method and shows profit @ 5%.
Please help.
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Necessity of Tax Audit U/S 44AB
Replies (5)
A taxpayer is required to have a tax audit carried out if the sales, turnover or gross receipts of business exceed Rs 1 crore in the financial year. However, a taxpayer may be required to get their accounts audited in certain other circumstances.
In this case is he required tax audit or not?
Whether state corporations required to get their books of accounts audited Us.44AB
Turnover doesn't exceed 1 Crore so no tax audit applicable u/s 44AB...
On combined reading of section 44AB(e), section 44AD(4) and section 44AD(1), if the net profit is less than 8% (cash receipts) or 6% (non cash recepts), then tax audit will be applicable if the total income is more than basic exemption limit (i.e Rs. 250000/-).
So inorder to avoid tax audit, it is necessary to show atleast 8% net profit and file the return under presumptive tax under section 44AD. This is because if turnover is less than 2 crores then section 44AD can be used.
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