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Compulsory Audit of Books of Accounts by Chartered Accountant (Section 44AB)

The following Persons are required to get their Accounts Compulsorily Audited by a Chartered Accountant : -

Different Taxpayers

When they are covered by the provisions of Compulsory Audit under section 44AB

A person carrying on Business

If the total sales, turnover or gross receipt in business for the previous year(s) relevant to the Assessment year Exceed or Exceeds Rs. 1 Crore.

A person carrying on Profession

If his gross receipts in profession for the previous year(s) relevant to the assessment year exceeds Rs. 50 Lakh.

A person covered under section 44AE 44BB or 44BBB If such person claims that the profits and gains from the business are lower than the profits and gains computed under these sections (irrespective of his turnover).
A person covered
under section 44ADA
if such person claims that the profits and gains from the profession are lower than the profits and gains computed in accordance with the provisions of section 44ADA and if his income exceeds the maximum amount which is not chargeable to tax.
A person covered
under section 44AD(4)
if a person carrying on business is covered by the provisions of section 44AD(4) and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year.
  1. Every person Carrying on Business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed Rs.1 Crore in any previous year, get his accounts of such previous year audited by a Chartered 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.

  2. It may be noted that the assessee is required not only to get his accounts audited by the Specified Date but also furnish the audit report on or before the Specified Date, irrespective of the fact whether the Return Of Income is Filed by that date or not. If the audit report is submitted on or before the due date but the return of income is filed subsequently then a copy of theTax Audit Report and the proof of Filling the same should be submitted alongwith the Return Of Income.

    Specified Date shall be as under :

(a) Where the assessee is required to furnish a report of a chartered accountant as referred to in Section 92E relating to international transaction or specified domestic transaction

30th November of the relevant Assessment Year.

(b) In any other case

30th September of the relevant Assessment Year.

 

  1. In the case of a person Carrying on Profession, the provisions for compulsory audit are applicable if his gross receipts in profession exceed Rs. 50,00,000 in any previous year.

  2. In case of a person who is carrying on the business and covered under section 44AE, 44BB or 44BBB and claims that his income from the said business is lower than the deemed profits and gains computed under the above relevant Sections, he shall have to get his accounts of such previous year audited by a Chartered Accountant on or before the Specified Date.

  3. Where a person who is carrying on a profession referred to in Section 44ADA and claims that:

    1. income from such profession is lower than 50% of the gross receipt of the profession; and

    2. his income exceeds the maximum amount which is not chargeable to income tax in any previous year

  4. he shall get his accounts of such previous year audited by a Chartered Accountant on or before the Specified Date.

  5. A person carrying on a business shall,—

  6. — if the provisions of section 44AD(4) are applicable in his case, and

    — his income exceeds the maximum amount which is not chargeable to income tax in any previous year get his accounts of such previous year audited by a Chartered Accountant on or before the specified date.

    However, this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of section 44AD(1) and his total sales, turnover or gross receipts, as the case may be, in business does not exceed Rs. 2 Crore in such previous year.

Report of Audit of Accounts [Rule 6G]

  1. The report of audit of the accounts of a person required to be furnished under section 44AB shall:

    1. in the case of a person who carries on business or profession and who is required by or under any other law to get his accounts audited, be in Form No. 3CA;

    2. in the case of a person who carries on business or profession, but not being a person referred to in clause (a), be in Form No. 3CB;

  2. Further, the particulars which are required to be furnished under section 44AB shall, in the case of a person carrying on business or profession, be in Form No. 3CD;

 

Topics...on ‘Profits and Gains of Business or Profession’

Define … ‘Profits and Gains of Business or Profession’ and its Computation (Section 28)
Method of Accounting for Computing Business Income (Section 145)
Principles for Allowing Business Deductions / Allowances from Profits and Gains of Business or Profession.
Expenses Allowed as Deductions against Profits and Gains of Business or Profession [Section-30-37]
[Section 37(1)] : General Or Allowable Deductions under Business or Professions
Business Losses Deductible under the head  'Profits and Gains of Business or Profession'.
Expenses Not Deductible under the head 'Profits and Gains of Business or Profession (Section 40, 40A, 43B)
DEEMED PROFITS Chargeable to Tax as Business Income Under Profits and Gains of Business or Professions [Section 41]
Taxation of Undisclosed Business Income/Investments from Undisclosed Sources
Deduction in respect of Expenditure incurred on setting up of a Specified Business [Section-35AD] :
When Maintenance of Books of Accounts becomes Compulsory (Section 44AA)
Compulsory Audit of Books of Accounts by Chartered Accountant (Section 44AB)
Computation of Income On Estimated Basis Under Sections 44AD, 44ADA and 44AE



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