Individuals are required to get their books of accounts audited even if they are running a sole proprietorship business and salaried individuals are also attracted under the provisions of audit in certain situations.
Scenerio1 â€“ Compulsory Audit u/s 44AB:
Audit becomes mandatory in the following cases:
- Person carrying on business if his total sales, turnover or gross receipts exceeds Rs.60lacs in the previous year relevant to the assessment year;
- Person carrying on profession, if his gross receipts in profession exceeds Rs.15 lacs in the previous year relevant to the assessment year;
- Person covered under section 44AE, 44BB or 44BBB, if such person claims that the profits from the business is lower than the profits computed under these sections;
Person covered under section 44AD, if such person claims that the profits from the business is lower than the profits computed under this section and his income exceeds the maximum exemption limit.
Scenerio2 – Compulsory Audit u/s 44AD:
Presumptive taxation scheme (Section 44AD) has been incorporated to provide for special provisions for computing business profit on presumptive basis. It provides the following:
- The provision of this section provides if the total sales, turnover or gross receipts does not exceeds Rs.60lacs in the previous year then the assessee is required to disclose at least 8 per cent of the gross turnover/receipts as income from his business.
- In case the assessee does not discloses the same, that is, he declares his income less than 8 per cent of total turnover (or say loss), then he is required to maintain books of accounts and to get compulsory tax audit under provisions of section 44AA and 44AB.
- Thus an assessee cannot escape from tax audit even if he is incurring loss in his business.
Hence it can be seen that the new provisions have a deep impact on the individual taxpayers especially on those salaried individuals who deals in Futures & Options transactions as part of their investments. Due to market fluctuations and daily ups and downs in the economy, these individuals incurs heavy losses in F&O transactions but due to the insertion of section 44AD, even they are now eligible to get their accounts audited.
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