Third Proviso – Clarification Every company or a firm shall furnish on or before the due date the return in respect of its income or loss in every previous year If the company or firm has incurred loss in any previous year then also the filing return of income is mandatory for them. Sec 44AE provides for presumptive taxation in case of any assessee owning not more than 10 goods carriage at any time during the previous year and who is engaged in the business of plying, hiring or leasing such goods carriage. The turnover for the purpose of Sec 44AB/Sec 44AD is not defined in the act. Where the assessee to whom the provisions of sec 44AE apply declares the profit which is lower than the presumptive profit as per sec 44AE, he shall be liable to maintain books of accounts and get his accounts audited. Turnover : 1.05 Cr Sec 44AD(4) as amended by Fin Act 2016 provides that when the assessee declares profit as per the presumptive taxation scheme in a previous year and in any of the five years immediately succeeding the previous year declares profit not in accordance with the scheme, he shall not be eligible for the scheme for the next five years . The section provides that in case of eligible assessee engaged in eligible business, a profit of 8% of total turnover or such a higher amount as claimed to have been earned by the assessee shall be deemed to be profits and gains of business. 5 crores for the tax audit is inserted below clause (a) to section 44AB. proviso to Sec 44AB,if 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 dateDidn't understand the meaning. The Third Category covers persons whose income is assessed on a presumptive basis under section 44AE, 44BB, or 44BBB. Similarly, income tax law also mandates an audit called ‘Tax Audit’. 1. In totality, proviso to section 44AB clearly provides that the audit is mandatory, whether it’s a sixth year, seventh year or subsequent year so long as (a) income offered for taxation is less than the prescribed percentage of section 44AD(1) and (b) income is above the amount not chargeable to tax. The amount of presumptive profit in such case is as follows. As stated above, under section 44AB of the Act, every person carrying on business is required to get his accounts audited, if his total sales, turnover or gross receipts, in business exceed or exceeds one crore rupees in any previous year. However, vide clause (vii) of the first proviso of the Notification No. WHETHER TAX AUDIT IS MANDATORY FOR ALL PVT LTD COMPANIES? Click Here To Subscribe To Our Free Newsletter, Click here to download the article in pdf format, Admissibility Of Electronic Evidences – Income Tax Proceedings, Scheme For Faceless Assessments And Appeals – Analysis Thereof, The Direct Tax Vivad Se Vishwas Act, 2020: CBDT Circular No. The payer under Section 194C is any person being an individual or HUF who is liable to audit od accounts under Section 44AB during the financial year in which obligation to deduct tax arises. Section 44AB: An Analysis of Tax Audit provisions after Finance Act, 2020. Therefore any receipts or payments made other than cash shall be recognised under this proviso. However, the above condition will apply only for five years subsequent to the year in which assessee has opted out of the scheme and after the lapse of such five years he shall not be liable to tax audit u/s 44AD(4) even if he declares profit lower than 8%/6%. Sec 44AB(d) also provides that tax audit shall be applicable in case of professional to whom sec 44ADA apply, and who has claimed his profit to be lower than the presumptive tax rate of 50%. Section 194J – Fee for Professional or Technical Services: ... (third proviso to Section 194J). Eligible assessee is defined to be an individual, HUF or a partnership firm other than LLP, who is a resident; and who has not claimed deduction under sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading "C. – Deductions in respect of certain incomes” i.e. 1-6-2016] Sub-clause (iii) of section 2(37A) has been amended so as to provide that for the purposes of deduction of tax under section 194LBB, or section 194LBC the "rates in force" in … Even in TAX AUDIT cases no books of accounts are maintained in most of the cases, since no scrutiny at all by the Department. The author tries to analyze the various provisions relating to applicability of tax audit so as to provide clarity on the subject. In the view of the above it can be inferred that the turnover should include the amount of GST even if the assessee follows exclusive method of accounting. Pramod Jain, A short video on Due date on Filing of LLP Form 8 for FY 2019-20, PPT on Conversion into LLP and its Taxation by CA. AY 2018-19 Opted 44AD as Turnover was less then 2CR Return of Income (Section 139 to 140A) The objective of reporting/ certification is to discourage tax avoidance and tax evasion. Legislative intent and object behind enacting both the provisions are different and the same should not be confused. 24. Whether partnership firm has to audit its book of account if there is loss ? CA Rajat Power has pointed out that section 44AB of the income-tax Act, 1961, which provides for tax audit of certain taxpayers, has been amended in the recent past in order to relax the compliance burden on small taxpayers. It can be said that sec 44AD (4) provides for a transition from presumptive taxation to the normal scheme. [Refer point 5 below for further discussion on Section 44AD (4) & (5)] 5. (Inclusive method of accounting) However, if the Excise duty or sales tax recovered are kept in separate account and payments to the authority are debited in the same account, the amount of excise duty and sales tax should not be included in turnover. Third proviso to section 44AB:- Audited under any other law. In other words, if certain individuals meet the requisites as prescribed under Section 44AB, then these individuals will have to ensure that their accounts are audited by a certified Chartered Accountant. 24. The first proviso to section 44AB stipulates that the provisions of that section will not be applicable to a person who derives income of the nature referred to … Every person,— (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; or (b) carrying on profession shall, if his gross receipts in profession exceed 50 lakh rupees in any previous year; or (c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits … Even though the language of the section is clearly worded there may be ambiguities in respect of initial years of its operation For e.g. 19.5 The proviso to Section 44AB only carves out an exception to those persons whose accounts are compulsorily audited under other laws in the country, like the Companies Act or the Co-operative Societies Act. For this purpose, a proviso is added to clause (a) of section 44AB. Clause by Clause Analysis with reporting requirements in Tax Audit Report (Part A of Form 3CD) Clause No. Doesnt the Block of 5 years break automatically if the case doesnt fall in 44AD and hence audit was done under 44AB … Only the latest & most important updates on taxation, Demystifying Applicability Of Tax Audit u/s 44AB Of The Income-tax Act, 1961. An exception to this rule is carved out by the proviso to sec 44AB which provides that, if the turnover of the assessee is up to Rs 2 Cr and he is eligible and has declared profits as per presumptive taxation scheme u/s 44AD, he shall not be liable for tax audit. 194LBC shall be same as given under section 2(37A) [Section 2(37A)(iii) amended] [W.e.f. In the view of the above legal position it can be inferred that the assessee shall be eligible to opt for presumptive taxation/ declare profits lower than 8%/6% without taking into consideration whether he had opted for presumptive taxation for any of the Assessment Year prior to A.Y 2017-18 or not. Pramod Jain, PPT on Recent TDS and TCS issues by CA. The third proviso to section 3(1) of the Bill reads as under- Provided also that where the specified Act is the Income-tax Act, 1961 and the compliance relates to— (i) furnishing of return under section 139 thereof, for the assessment year commencing on the— From the example 3 and example 4 it is observed that where the assessee has turnover less than Rs 2 Crores and declares profit less than 8%/6% tax audit is applicable, where as in case the assessee has turnover between 2 Crs to 5 Crs, no tax audit is applicable even if he has declared profits less than 6%/8%. Pramod Jain, FAQs on GST - Series 11 - Experts Panel Compilation, PPT on Overview of Tax Audit & Clauses 1 to 14 & 32 to 34 of Form 3CD by CA. Clause 44AB( e )- Profit and gains lower than deemed profit u/s 44AD. A third threshold limit of Rs 5 crores has been added in order to reduce compliance burden on small retailers, traders, shopkeepers who comprise the MSME sector. Tax audit applicability vis-à-vis presumptive taxation u/s 44AD for business [Sec 44AB(e)]. However, while these amendments are well-intentioned, they have increased confusion amongst taxpayers. whose gross turnover/receipts of the business/profession in the immediately preceding financial year exceeded business/profession in the immediately preceding financial year exceed Rs. Turnover of the assessee being an integral part of income chargeable under the head PGBP, the provisions of sec 145A shall apply for the purpose of calculation of turnover. As Per Sec 44AB of Income Tax Act,1956,Tax Audit is required to be conducted if the ceiling limit of Rs.100 lakhs or Rs.25 lakhs,as the case may be, is exceeded.But proviso to Sec 44AB,if 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 … proviso to Sec 44AB,if 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, Audit & Assurance and Accounting Standards, Corporate Matters/LLP, Income Tax, Insolvency and Bankruptcy Code, RBI / FEMA, International Taxation , Transfer Pricing, Benami Property Law, Bank / Insurance / Stock / Debtors Audit, Internal Audit, Code of Ethics, ICAI, Miscellaneous, Audit & Assurance and Accounting Standards, Corporate Matters/LLP, Goods and Services Tax (GST), Income Tax, Bank / Insurance / Stock / Debtors Audit, Code of Ethics, Corporate Matters/LLP, Insolvency and Bankruptcy Code, Income Tax, Insolvency and Bankruptcy Code, RBI / FEMA, International Taxation , Transfer Pricing, Benami Property Law, Bank / Insurance / Stock / Debtors Audit, Audit & Assurance and Accounting Standards, Customs & Excise, Corporate Matters/LLP, Goods and Services Tax (GST), Income Tax, Ind AS, Insolvency and Bankruptcy Code, RBI / FEMA, SEBI, International Taxation , Transfer Pricing, Benami Property Law, Bank / Insurance / Stock / Debtors Audit, Internal Audit, Code of Ethics, Audit & Assurance and Accounting Standards. 44Ad provides the definition of the constitution third proviso to section 44ab India i.e equality before law there may be ambiguities respect! 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