As per Section 44AB of the Income Tax Act, 1961, the following categories of taxpayers are eligible for tax audit in India:
- Any person carrying on business whose total sales, turnover, or gross receipts exceed Rs. 1 crore in the financial year.
- Any person carrying on a profession whose gross receipts exceed Rs. 50 lakhs in the financial year.
- Any person who is eligible for presumptive taxation under Section 44AE, Section 44BB, or Section 44BBB and has claimed a lower income than the deemed income under the presumptive taxation provisions.
- Any person who is eligible for presumptive taxation under Section 44AD and has declared income lower than the deemed income under the presumptive taxation provisions and whose total income exceeds the maximum amount not chargeable to tax in a financial year.
Apart from the above categories, there may be certain other cases where a taxpayer may be required to undergo a tax audit as per the discretion of the assessing officer. It is advisable to consult a chartered accountant or a tax professional to determine if tax audit is applicable to a particular taxpayer.
Section 44AD of the Income Tax Act, 1961 provides a presumptive taxation scheme for small taxpayers engaged in any business except the business of plying, hiring or leasing goods carriages.
Under this scheme, taxpayers can calculate their taxable income based on a percentage of their total gross receipts or turnover, without having to maintain regular books of accounts. The percentage prescribed under this scheme is 8% of the gross receipts or turnover, for businesses where the receipts are received by way of account payee cheques or account payee bank drafts or use of electronic clearing system. For businesses where receipts are received in any other mode, the percentage is 6% of the gross receipts or turnover.
It is important to note that taxpayers opting for the presumptive taxation scheme under Section 44AD are not required to maintain regular books of accounts, including those related to purchases, expenses, or depreciation. However, they are required to maintain certain basic records such as the total gross receipts, expenses related to the business, and details of assets and liabilities.
Taxpayers opting for the presumptive taxation scheme under Section 44AD are not required to undergo a tax audit, provided their total income does not exceed the maximum amount not chargeable to tax in a financial year. However, if the total income of the taxpayer exceeds the maximum amount not chargeable to tax, then the taxpayer is required to maintain regular books of accounts and undergo a tax audit.
The presumptive taxation scheme under Section 44AD provides a simple and convenient way of calculating taxable income for small taxpayers engaged in any business except the business of plying, hiring or leasing goods carriages.
Section 44ADA of the Income Tax Act, 1961 provides a presumptive taxation scheme for professionals whose gross receipts do not exceed Rs. 50 lakhs in a financial year.
Under this scheme, professionals can calculate their taxable income based on a presumptive rate of 50% of the gross receipts, without having to maintain regular books of accounts. Professionals covered under this scheme include:
- Legal, medical, engineering or architectural professionals.
- Accountants, technical consultants or interior decorators.
- Other notified professionals whose profession is notified by the Central Board of Direct Taxes (CBDT).
It is important to note that professionals opting for the presumptive taxation scheme under Section 44ADA are not required to maintain regular books of accounts, including those related to purchases, expenses, or depreciation. However, they are required to maintain certain basic records such as the total gross receipts, expenses related to the profession, and details of assets and liabilities.
Taxpayers opting for the presumptive taxation scheme under Section 44ADA are not required to undergo a tax audit, provided their total income does not exceed the maximum amount not chargeable to tax in a financial year. However, if the total income of the taxpayer exceeds the maximum amount not chargeable to tax, then the taxpayer is required to maintain regular books of accounts and undergo a tax audit.
The presumptive taxation scheme under Section 44ADA provides a simple and convenient way of calculating taxable income for small professionals whose gross receipts do not exceed Rs. 50 lakhs in a financial year.
Section 44AE of the Income Tax Act, 1961 provides a presumptive taxation scheme for taxpayers engaged in the business of plying, hiring, or leasing goods carriages. It offers a simple and hassle-free way of calculating taxable income by applying a predetermined rate on the gross receipts of such business.
The scheme is applicable to taxpayers who own not more than 10 goods carriages at any time during the financial year and who use them for business purposes. As per the scheme, the taxpayer is deemed to have earned an income at the rate of Rs. 7,500 per month or part of a month for each goods carriage owned by him. Thus, if a taxpayer owns 5 goods carriages, his deemed income under Section 44AE would be Rs. 37,500 per month (5 x Rs. 7,500).
The deemed income calculated under Section 44AE is considered as the final taxable income of the taxpayer and no other expenses or deductions are allowed to be claimed against it. However, any income earned by the taxpayer from other sources is required to be added to the deemed income and tax is to be calculated on the total income as per the applicable tax rates.
Taxpayers opting for the presumptive taxation scheme under Section 44AE are not required to maintain regular books of accounts or undergo a tax audit, subject to certain conditions. The scheme offers a simple and convenient way of calculating taxable income for taxpayers engaged in the business of plying, hiring, or leasing goods carriages.
This article is for informational purposes only and is based on the author’s interpretation of the relevant provision. It should not be taken as professional advice.
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