Various Examples Discussing Income Tax Audit Applicability

Various Examples Discussing Income Tax Audit Applicability

Q	Source of Income	F.Y.19-20				F.Y.20-21				Reason
		Turnover	Profit	Profit %	Section	Turnover	Profit	Profit %	Audit ???
1	Business	3 Crore	9 Lakh	3%	44AB	1.5 Crore	4.5 Lakh	3%	Yes	Note 1
									No	Note 2
2	Business	1.12 Crore	9 Lakh	8%	44AD	1.5 Crore	6 Lakh	4%	Yes	Note 1
									Yes	Note 3
3	Profession	60 Lakh	12 Lakh	20%	44AB	40 Lakh	10 Lakh	25%	Yes	Note 6
4	Business	3 Crore	9 Lakh	3%	44AB	90 Lakh	3.6 Lakh	4%	No	Note 1
5	Business	1.12 Crore	9 Lakh	8%	44AD	90 Lakh	3.6 Lakh	4%	Yes	Note 4
6	Business	1.12 Crore	9 Lakh	8%	44AD	90 Lakh	1.8 Lakh	2%	No	Note 5

Note 1 As per S. 44AB (a), Audit is required if turnover in business exceeds 1 crore rupees in the previous year so if turnover is up to 1 crore then an audit is not required even though the profit is below 8 % / 6 %
Note 2 Turnover limit as per proviso to S.44AB (a) is 10 crore if Receipts and Payments in cash does not exceed 5 % if these conditions are satisfied then an audit is not required as per S.44AB(a)
Note 3 Even though Receipts and Payments in cash does not exceed 5 % then also audit is applicable as per S.44AB (e), because proviso to S.44AB (a) nowhere specifies exemption from S.44AB (e).
Note 4 As per S.44AB (e) Audit is applicable as S.44AD (4) Applicable and Total Income above the basic exemption limit
Note 5 Audit is not required as S.44AD (4) Applicable but Total Income is below the basic exemption limit
Note 6 As per S.44ADA (4), Audit is required as Profit is lower than S.44ADA (1) and Total Income above the basic exemption limit

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