Applicability of Section 44AB
A Person who is carrying on business, and whose total sales/turnover/gross receipts from business exceeds Rs. 1 crore. Exception – The above provision is not applicable to the person, who opts for presumptive taxation scheme under section 44AD and his total sales/turnover does not exceeds Rs. 2 crores.(Previously this limit was Rs. 1 Crore before 2016 Budget) A person who is eligible to opt for the presumptive taxation scheme of section 44AD but claims the profits or gains for such business under non – presumptive scheme which is lower than the profits and gains computed as per the presumptive taxation scheme of section 44AD and his income exceeds the amount which is not chargeable to tax.
Applicability of Section 44AD
A person can opt for presumptive scheme under section 44AD
Only applies in case of Individual, Partnership & HUF provided they are Resident in India.who is carrying his business and his total sales/turnover does not exceeds Rs. 2 crores andwho is not claiming deductions under section 10A/10AA/10B/10BA or under sections 80HH to 80RRB in the relevant year andwho is not carrying business of plying, hiring or leasing goods carriages referred to in sections 44AE. any agency business. and who is not earning income in the nature of commission or brokerage
In case of a person adopting the provisions of section 44AD, income will be computed on presumptive basis, i.e., at least @ 8% of the turnover or gross receipts (6% in respect of total turnover or gross receipts which is received by an account payee cheque or draft or use of electronic clearing system or through such other electronic mode) of the eligible business for the year and the provisions of allowance/disallowances as provided under the Income-tax Law will not apply. However, the assessee can claim deduction under chapter VI-A.
Amendments in Budget 2020-2021
⇓ Example – A company having turnover Rs. 4.5 crores in F.Y 2020-21, then that company is not liable for tax audit. ⇓ Example – A company having turnover Rs. 1.5 crores in F.Y 2020-21 and more than 5% of business transaction is in cash will be liable to Tax Audit if the assessee does not show Profits at least 6% or 8% as per section 44AD. Rationale for increase in limit of Tax Audit subject to restricted cash transaction
Reduction in compliance burden on MSME SectorBoost up cash less economy
Change in Due Date of Tax Audit and Income Tax Return Filing As of now, Tax Audit Report along with Income Tax Return is required to be submitted on or before 30th September whereas the above proposed amendment will be effective from F.Y 2020-21 onwards.
Rationale for change in Due Date
To enable pre-filing of returns on basis of audit reports
Types of Tax Audit FORM
Tax auditor shall furnish his report in a prescribed form Form No. 3CA is applicable for section 44AB and this form is to be furnished when a person carrying on business or profession is mandatorily to get his accounts audited under any other law. Form No. 3CB is applicable for section 44AD and this form is to be furnished when a person carrying on business or profession is not required to get his accounts audited under any other law. However tax auditor must furnish the prescribed particulars in Form No. 3CD, which forms part of audit report and it is mandatory for Section 44AB as well as Section 44AD where applicable strictly adhere to Rule 6G(2) of the Income Tax Rules 1962.
Penalty of non filing or delay in filing tax audit report
If any taxpayer required to get the tax audit, but fails to do so, the least of the following may be levied as a penalty:
0.5% of the total sales, turnover or gross receiptsRs 1,50,000
Recommended
Assessment Year (AY) & Previous Year (PY)incometaxefilingTDS Rate ChartPAN Name By PAN NoIncome Tax Slab Rates