Compulsory Audit of Business and Profession under Section 44AB of the Income Tax

As per section 44AB of the Income Tax Act, 1961 every business and profession has to undertake compulsory tax audit in case turnover from such business exceeds Rs 1 crs for business and in case of profession gross receipt exceeds Rs 25 lakhs from such profession. In case if turnover/receipt is less than given limit assessee can opt for deemed income provision and profit and gain from such business and profession has to be minimum of 8% of such Turnover/Gross Receipt.Calculating Business Gain on Presumptive Basis under Section 44AD of the Income Tax Act: Deemed Income

Compulsory Tax Audit Limit

For Business Turnover/Sales to Exceed

Assessment Year

Prior to Year 1.4.2011

1.4.2011 to 31.3.2013

For Year 2013-14

Amount Exceeding (In Rs.)

40 Lakhs

60 Lakhs

100 Lakhs

For profession – Taxation of Business Income: Calculating Income Tax on Profit from Business and Profession

Assessment Year

Prior to Year 1.4.2011

1.4.2011 to 31.3.2013

For Year 2013-14

Amount Exceeding (In Rs.)

10 Lakhs

15 Lakhs

25 Lakhs

Reference: Section 44AB of the Income Tax Act, 1961 (Also Read How to Claim Deduction for Payment made to relatives as Business Expenditure under section 40A (2) of Income Tax Act)

Audit of accounts of certain persons carrying on business or profession Read Compulsory Maintenance of Books of Accounts under Section 44AA of Income Tax Act

Every person,—

  • carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds sixty lakh rupees in any previous year or
  • carrying on profession shall, if his gross receipts in profession exceed fifteen lakh rupees in any previous year; or
  • carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AE or section 44BB or section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or
  • carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AD and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business 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 an 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 :

Provided that this section shall not apply to the person, who derives income of the nature referred to in section 44B or section 44BBA, on and from the 1st day of April, 1985 or, as the case may be, the date on which the relevant section came into force, whichever is later: Also Read Disallowance of Certain Expenses if TDS has not been Deducted or if Deducted then not Deposited to Government within time

Provided further that 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 and furnishes by that date the report of the audit as required under such other law and a further report by an accountant in the form prescribed under this section. Also Read Deduction for Expenses only on Actual Payment under Income Tax Section 43B

Explanation.—For the purposes of this section,—

  • “accountant” shall have the same meaning as in the Explanation below sub-section (2) of section 288;
  • “specified date”, in relation to the accounts of the assessee of the previous year relevant to an assessment year, means the due date for furnishing the return of income under sub-section (1) of section 139


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