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Tax audit applicability_ay 2016-17

Shenba Associates (Partner) (115 Points)

26 September 2016

Its a Firm has a turnover of Rs. 20,00,000/- and Net Profit/Total Income is less than 8% of Turnover as per normal provision not under section 44AD of Income Tax Act. In this case Tax Audit is applicable or not???

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9 Replies

CA Saba Naaz (Chartered Accountant) (8487 Points)
Replied 26 September 2016

I think tax audit is not applicable in this case , since the turnover is less than the limit prescribed for tax audit and it is also not covered u/s 44AD to attract applicability of Sec.44AB.

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Shenba Associates (Partner) (115 Points)
Replied 26 September 2016

Thanks friend....

CA Raj Doshi (Practising CA) (8924 Points)
Replied 26 September 2016

Declaration of lower income

If the actual income from the business covered under section 44AD is lower than the income prescribed under the presumptive scheme, then the assesses can declare income from aforesaid business at a lower rate (i.e., at less than 8%).

If the asses see does so, i.e., declares lower income and his actual income exceeds the maximum amount which is not chargeable to tax, then the relief from maintenance of books of account is not available and he is required to maintain the books of account as per section 44AA and further, he has to get such books of account audited as per section 44AB.

CA Raj Doshi (Practising CA) (8924 Points)
Replied 26 September 2016

Illustration

Mr. Sashank is running a stationary mart. The turnover of the business during the previous year 2012-13 is Rs. 84,48,252. His actual income from this business is only Rs. 5,52,848 which is less than Rs. 6,75,860 (i.e., Rs. 84,48,252 * 8%). In this case can he declare actual income which is lower than the limit prescribed under section 44AD? ** As per the provisions of section 44AD, if the actual income from the business covered under section 44AD is lower than the income prescribed under the presumptive scheme, then the assessee can declare income from aforesaid business at a lower rate (i.e., at less than 8%). Thus, in this case Mr. Sashank can declare lower income. However, in this case he has to maintain the books of account prescribed under section 44AA and has to get such books of account audited, since in this case his actual income exceeds the exemption limit (i.e., Rs. 2,00,000).

sowmya (audit assistant) (228 Points)
Replied 27 September 2016

I agree with Mr Raj doshi

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Mukesh Kumar (Accounts Manager) (1466 Points)
Replied 27 September 2016

SIR

FIRST PLEASE TELL YOUR ACTUAL BUSINESS WORK

CA Saba Naaz (Chartered Accountant) (8487 Points)
Replied 27 September 2016

The provision regarding applicability of tax audit in case of income exceeding maximum exemption limit has been made applicable from A.Y.2017-18. The question is for A.Y.2016-17

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