[ii] whose total turnover or gross receipts in the previous year does not exceed an amount of two crore rupees. Section 44AB of Income Tax Act. Under section 44AB of the Income-tax Act, 1961, it is obligatory for certain specified persons, carrying on business or profession to get their accounts audited by an ‘accountant’ and submit a copy of the ‘audit report’ in prescribed form (Form No. If a person files his return under section 44AD and his turnover is up to Rs. 94/2020-Central Tax, Removal of Director Under Companies Act, 2013 with Notice & Resolution formats, GST Moving Towards Inspector Raj……. 5 crores in cases where the aggregate cash receipts AND aggregate cash payments made during the year does not exceed 5% of total receipt and total payment respectively. My question is regard to stock option trading – if I purchase a stock option on Sharekhan, and make a loss, is it deemed there is a cash payment? In your chart of tax audit — pt no 4 & 5 – if turnover is > than 1 crore & < 2 crore and < 1 crore. Salil. 1 crore. 50 Lakhs. A person is having commission business, 44AD not applicable to it, turnover is 80 Lakhs, and profit is 3 percent, Is audit applicable?? The audit under section 44AB aims to ascertain the compliance of various provisions of the Income-tax Law and the fulfillment of other requirements of the Income-tax Law. Therefore, it is proposed to amend these sections so that reference to the monetary limit specified in clause (a) or clause (b) of section 44AB of the Act is substituted with Rs. 44AB(e) may not applicable unless the assessee had earlier opted for 44AD and then comes out of it. 3CB - Audit report under section 44AB of the Income-tax Act, 1961, in the case of a person referred to in clause (b) of sub-rule (1) of rule 6G; Form No. From financial year 2016-17 this limit is raised to Rs. CLAUSE 8 : Indicate the relevant clause of section 44AB under which the audit has been conducted a. 25 lacs. Even the Old Regime and NEW Regime too. New Rule 6G, inserted in the Income-tax Rules, prescribes the Forms of Audit report for the above purpose. It is very say that new amendments in 2020 is not suitable for small taxpayers compared to Middle and Higher class taxpayers. In Present, if an assessee claims that his profits and gains from ‘eligible business’ are less than 8% or 6% or 50% of the total turnover or gross receipts [as the case may be as per Section 44AD and 44ADA] and whose total income exceeds the maximum amount not chargeable to tax, the assessee shall maintain the books of account as prescribed under Section 44AA of the IT Act [as per u/s 44AA(iv) or Section 44ADA(4) as the case may be] and get them audited under section 44AB … Explanation. Clause (c) of section 44AB, inserted by the Finance Act 1997 w.e.f. —For the purposes of this section, —. Accordingly 44AD(5) will also not be applicable. 3CA and Form 3CD. but New Regime is better for net taxable income above 15Lacs. 8:43. 2 crores. Because , Sec 44 AD [1] provisions applicable to eligible business. 1. 3CD. 08 September 2014 I have to Audit But there is a problem with in Auditor info.Software is showing there 6 option. 3CA or 3CB) and such further prescribed particulars (in Form No. AY 20-21). 3CA - Audit report under section 44AB of the Income-tax Act, 1961, in a case where the accounts of the … 44AB. Though meticulous care has been taken but the author assumes no liability in respect of any loss/damage incurred while acting on the basis of information provided. thanks . assessment year 1998-99, provides that in the case of an assessee carrying on a business of the nature specified in sections 44AD, 44AE , tax audit will be required, if he claims his income to be lower than the presumptive income deemed under the said sections. Maintained by V2Technosys.com, Taxguru Consultancy & Online Publication LLP, 509, Swapna Siddhi, Akurli Road, Near Railway Station, Kandivali (East), Section 44AB: An Analysis of Tax Audit provisions after Finance Act, 2020, Summary of GSTR 3B Compliance post the 40th GST Council Meeting (Due dates, Interest and Late fees), Bonafide switch from Percentage completion to Project completion method allowable, CIT cannot ask AO to look into issues not within the purview of limited scrutiny, Challenge to vires of Circulars & Constitutional Validity of Section 9(a)(ii) of Direct Tax Vivad se Vishwas Act, Due Dates as per Income Tax Act 1961 expiring on 31st December 2020? 1cr. Recent Update: For businesses with an annual turnover of less than Rs 5 crore, filing of GSTR-9C for FY 2018-19 has been waived off. Maintained by V2Technosys.com, Taxguru Consultancy & Online Publication LLP, 509, Swapna Siddhi, Akurli Road, Near Railway Station, Kandivali (East), Amendment in Section 44AB & applicability for AY 2020/21- Analysis, How to fill ITR 3 from Tax Audit Report – An Analysis, Income Tax TCS provision – Section 206C[1H] – wef 01/10/2020, Issues in Tax Audit – Difference in ITC in GSTR 2A & GSTR 3B, Conditions for claiming Income Tax deductions under chapter VIA, Bonafide switch from Percentage completion to Project completion method allowable, CIT cannot ask AO to look into issues not within the purview of limited scrutiny, Challenge to vires of Circulars & Constitutional Validity of Section 9(a)(ii) of Direct Tax Vivad se Vishwas Act, Due Dates as per Income Tax Act 1961 expiring on 31st December 2020? Under clause (a) if the person is carrying on business whose total sales, turnover or gross receipts, as the case may be, exceed Rs one crore. In other words, more than 95% of the business transactions should be done through banking channels in order to avoid tax audit. I always believe that any analysis should begin by reading the bare act. 1] His aggregate of all receipts in cash during the previous year does not exceeds 5 % of such receipts. I had the same thought regarding this. The amended provision of section 44AB is effective for financial year 2020-21 relevant to the assessment year 2021-22. get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed: Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year: Provided further that this section shall not apply to the person, who derives income of the nature referred to in section 44B or section 44BBA, on and from the 1st day of April, 1985 or, as the case may be, the date on which the relevant section came into force, whichever is later : Provided also that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and furnishes by that date the report of the audit as required under such other law and a further report by an accountant in the form prescribed under this section. Sec 44AD not applicable), Aggregate cash payments ≤ 5% total payments. 1. Thanks. d) Tax audit is in purview of 44AD. A tax audit is an examination of a taxpayer’s books of accounts. Your email address will not be published. Form No. The new proviso to section 44AB providing the enhanced turnover limit of Rs. In case of a person carrying on profession, tax audit is required if his gross receipts in profession exceeds Rs. The audit under section 44AB aims to ascertain the compliance of various provisions of the Income-tax Law and the fulfillment of other requirements of the Income-tax Law. 2 crore, provisions of Sec 44 AD [1] is not applicable to him. 92/2020- CT to 94/2020- CT, Extend due dates for Income Tax Audit & Returns for AY 2020-21, Extend Tax Audit/ITR due dates for AY 2020-21, ICAI requests for extension of various Income-tax due dates, Extend Due Dates for Tax Audit and Income Tax Return Filing, Extend Income Tax Audit & ITR Due dates for AY 2020-21, Extend due dates of Audit Reports, ITRs, GST Returns, VSV Scheme, Extend due date for filing ITR & Tax Audit Report- AY 2020-21, Extend Tax/TP Audit & ITR Due dates for AY 2020-21, Open letter for extension of Due dates under Income Tax and GST, Gross receipts from profession in the financial year, Profits and gains (as a % of total Gross receipts), Total sales, turnover or gross receipts in the Financial year, Profits and gains (as a % of total sales, turnover or gross receipts). Thus, For AY 20-21 the due date for filing tax audit report for FY 2019-20 corresponding to the assessment year 2020-21 will be 30th Sept, 2020 (one month prior to 31st Oct, 2020), (Recent update: On account of the Covid-19 situation , the government in a press conference dated May 13, 2020 announced that the income tax return (ITR) filing deadline for FY 2019-20 for all persons has been extended  from July 31, 2020 & October 31,2020, 2020 to November 30, 2020 and tax audit report due date  from September 30, 2020 to  October 31, 2020 ), Now we will understand all the provisions of Sec 44AB wef. Today, we learn the provisions of section 44AB of Income-tax Act 1961. The above article is based on the authors private view. 44AB(a) Business Turnover Exceed 1 crore 44AB(b) Professional Gross receipt exceed 50 lacs 44AB(c)‐i Income less than Deemed income u/s 44AE 44AB(c)‐ii Income less than Deemed income u/s 44BB 44AB(c)‐iii Income less than Deemed income u/s 44BBB 44AB(d) for section 44ADA 44AB(e) for section 44AD 44AB(3) Audited under any other law Section 44AB of the Income Tax Act deals with the audit of accounts of certain individuals. Can such asseesse file tax audit report if they want? 17 [Audit of accounts of certain persons carrying on business or profession.. 18 44AB. The five clauses of section 44AB under which tax audit can be carried out are – a. Provisions of Sec 44AB will not applicable to him because Sec 44 AB provided clearly that –, “ Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of the sub-section [1] of section 44AD and his total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year. Thanks. 1) Up to AY 2019-20, a person carrying on business was compulsorily required to get his accounts audited by a chartered accountant, if his total sales, turnover or gross receipts (as the case may be) in business for the year exceeds Rs. Clause (c) of section 44AB, inserted by the Finance Act 1997 w.e.f. However, w.e.f. 4. [ that above Rs. How much? So in first possibility, he satisfy both condition of cash receipts and payments [ does not exceeds 5 % of such receipts and payments ] , he is not require to get his books of account audited under section 44 AB[a]  of the Income Tax Act, 1961. Yes, will make necessary changes. Just Check up before Panicking, Extend Income Tax, Companies & CGST Act compliance due dates, Provisions for modifying PAN based IEC introduced, Companies (Compromises, Arrangements & Amalgamations) Second Amendment Rules, 2020, Disqualification, Striking off And Cancellation of DIN, Changes in GST Rules relating to Registration, ITC Returns and E Way Bills, Practical issues on ITC after Notification No. Plz read the bare act again. Section 44AB of the Income Tax Act contains provisions pertaining to the tax audit under the Income Tax Audit. person referred to in clause (b) of sub-rule (1) of rule 6G 3CD Statement of particulars required to be furnished under section 44AB of the Income-tax Act, 1961 BACKGROUND The tax audit was introduced by section 11 of the Finance Act, 1984, which inserted a new section 44AB with effect from 1st April, 1985 [Assessment Year 1985-86]. i.e. ​​​​​​​The report of the tax audit conducted by the chartered accountant is to be ​furnished in prescribed form i.e. Is the new amendment giving an option to assessee (who satisfy the conditions) to refrain from filing tax audit report? The author shall not be responsible for any extracts or references made. Clause 44AB(c)-i 4. 5 crores for the tax audit is inserted below clause (a) to section 44AB. though his total cash receipts and total cash payments does not exceeds 5 % of such receipts or payments, but he is showing his income or profit from eligible business below 8 % or 6 % , as the case may be, he is required to get his books of account audited as per provisions of Sec 44 AD [1]. Is such a case, it shall be sufficient if such person gets the accounts of such business or profession audited under such other law and obtains the report of the audit as required under such other law and also a report by the chartered accountant in the form prescribed under section 44AB, i.e., Form No. In this scenario, person will not require to audit as he satisfy condition stated in  Sec 44 AD [1]. 94/2020-Central Tax, Removal of Director Under Companies Act, 2013 with Notice & Resolution formats, GST Moving Towards Inspector Raj……. Section 44AB gives the provisions relating to the class of taxpayers who are mandatorily required to get their accounts audited from a chartered accountant. In this scenario, person will not require to audit as he satisfy condition stated in Sec 44 AB [a] and Sec 44 AD [1] ‘b] His total profit or income for that business which is eligible business and. Required fields are marked *, Notice: It seems you have Javascript disabled in your Browser. Difficult to Genuine Tax Payers, Discussion on GST Notification No. Tax audit clause 44ab(d) or (e) This query is : Resolved Report Abuse Follow Query Ask a Query. Clause. In other words for a normal business who has not opted for declaring profit under 44AD (presumitive income) even if it is less than 8% 44AB(e) may not be applicable as 44AD(4) is not applied. If total income exceeds basic exemption limit only then tax audit is applicable, 3. This provision is​ not applicable to the person, who opts for presumptive taxation scheme under section 44AD​ and his total sales or turnover doesn’t exceed Rs. A] If person carrying on business, his total total sales, turnover, gross receipts is Rs. Since in todays world many small salaried or business have some commitment under 80C and other deductions which results into lower Net Taxable Income under Old Regime. Disclaimer : I tried to put analysis of the provisions of sec 44 AB and 44 AD of the Income Tax Act, 1961 and its applicability on assesses. If in this case the aggregate cash receipts and aggregate cash payments do not exceed 5% then the threshold limit will become Rs 5 crores and thus Audit u/s Sec 44AB(a) won’t be applicable. Clause 44AB(c)-iii In order to rationalisation and to reduce compliance burden on small and medium enterprises, Finance Act 2020 has amended the clause (a) of section 44AB,in whichit increased the threshold limit for applicability of Tax Audit, for a person carrying on business and increased it from one crore rupees to five crore rupees, where,- Nice , feeling like you r talking diectly…, Your email address will not be published. Relevant Clause of 44AB: Description: Clause (a) In case the assessee is carrying on business and his total sales, turnover or gross receipts as the case may be, exceeds one crore in the relevant previous year. These provisions have effect from.AY 2020-21, A pensioner is getting more than 5 lakhs Rupees as salary income and getting 2 lakhs Rupees from profession (with 51% as expenditure). The only option left is to go for audit u/s 44AB(e) which again is a debatable topic. Recently, we have discussed in detail section 44AA (maintenance of accounts by certain persons carrying on profession or business) of IT Act 1961. In such situation , following situation may arise: 1] Person whose total cash receipts and total cash payments does not exceeds 5 % of such receipts or payments. Join our newsletter to stay updated on Taxation and Corporate Law. Clause (c) 3CD) on or before the ‘specified date’. persons to whom Sec 44AD(1) applies). Thank for such a wonderful chart and explanation. assessment year 1998-99, provides that in the case of an assessee carrying on a business of the nature specified in sections 44AD, 44AE , tax audit will be required, if he claims his income to be lower than the presumptive income deemed under the said sections. There is some ambiguity in this case. This section provides for audit of accounts of assessees having total sales, turnover or gross receipts exceeding the specified limits of Rs.40 lakhs for business and Rs.10 lakhs for profession. Audit has to be done u/s 44 AD[5] of the Income Tax Act, 1961. It just discussion and study purpose. As per the new proviso, the tax audit turnover limit would be INR 5 Crores in case the following two conditions are satisfied: Clause 8: Indicate the Relevant Clause of section 44AB under which the audit has been conducted: Verify the applicability of clauses of sec. Thus, he has to compulsorily get his accounts audited u/s 44AB(e) for that AY and subsequent 5 AYs if the turnover ≤ 2 crores and Total income > basic exemption limit during such 6 years. All Rights Reserved. These amendments of 44AB is applicable from A.Y. Penalty for not getting accounts audited under Section 44AB. Sir, What is meant by cash payments has to be less than 5% or total payments? With effect from 01/04/2020, that is from assessment year 2020-21, this provision is amended as below: The threshold limit has been revised to increase it for a person carrying on business from Rs. [ that above Rs. While the turnover limit for Sec 44AB is INR 1 Cr, turnover limit for Sec 44AD is INR 2 Cr. Form No. The audit conducted by the chartered accountant of the accounts of the taxpayer in pursuance of the requirement of section 44AB​ is called tax audit. Audit of accounts of certain persons carrying on business or profession.44AB. Section 44AB. (e) carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year. So, first of all, let us read what the bare act has to say: (a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year, Provided that in the case of a person whose—, (a) aggregate of all amounts received including amount received for sales, turnover or gross receipts during the previous year, in cash, does not exceed five per cent of the said amount; and.