Are You Covered Under Tax Audit

wisp

Well-Known Member
In case you have salary income in excess of Rs 2.5 lakhs, then audit will become applicable with given facts shared by you.
Why is it necessary? In the following illustration given by incometax site, even 2 different businesses engaged in by the same person are treated differently as far as audit is concerned. So why would salary be combined?

Source: http://www.incometaxindia.gov.in/Tut...4AD-Theory.pdf
Illustration
Mr. Sipahi is running a medical store. The turnover of the business during the previous year 2012
-13 is Rs. 25,84,252 and he declared income as per the provisions of section 44AD. In this case will he be liable to maintain the books of account in respect of aforesaid business?
**
As per the provisions of section 44AD, an assessee who adopts the provisions of section 44AD,
is not required to maintain books of account as per section 44AA. However, the relief is
available only in respect of business covered by the provisions of section 44AD and not in
respect of any other business. Thus, if Mr. Sipahi owns any other business, then in respect of
such other business the provisions of section 44AA in respect of maintenance of books of
account will apply.
 

canikhil

Well-Known Member
Why is it necessary? In the following illustration given by incometax site, even 2 different businesses engaged in by the same person are treated differently as far as audit is concerned. So why would salary be combined?

Source: http://www.incometaxindia.gov.in/Tut...4AD-Theory.pdf
Illustration
Mr. Sipahi is running a medical store. The turnover of the business during the previous year 2012
-13 is Rs. 25,84,252 and he declared income as per the provisions of section 44AD. In this case will he be liable to maintain the books of account in respect of aforesaid business?
**
As per the provisions of section 44AD, an assessee who adopts the provisions of section 44AD,

is not required to maintain books of account as per section 44AA. However, the relief is
available only in respect of business covered by the provisions of section 44AD and not in
respect of any other business. Thus, if Mr. Sipahi owns any other business, then in respect of
such other business the provisions of section 44AA in respect of maintenance of books of
account will apply.

because the applicability of audit also depends on whether the total income exceeds maximum exempted limit or not. You are confusing two different issues.
 

princy01

Well-Known Member
The question here (about compulsory audit) is not about good profit making traders but about the traders who are either in loss or in meager profits.

BTW, do not compare yourself with other low profit making traders, you are making lakhs per week, so for you spending 10K on audit is peanuts. :D
if the law permits dont get audit done , but if its needed then even small trader will have to get it done

about peanuts , it was not peanuts for me last year , i was in loss last year so audit had to be done .

i am the most ordinary guy with normal mind and lots of loss making years , i hope all trader here make it good that audit is required compulsory year after year , make good money and give honest taxes to govt and fees to CA's :thumb::thumb:
 

wisp

Well-Known Member
because the applicability of audit also depends on whether the total income exceeds maximum exempted limit or not. You are confusing two different issues.
I think the income referred to is the total income from the business:

Illustration
Mr. Sashank is running a stationary mart. The turnover of the business during the previous year 2012-13
is Rs. 84,48,252. His actual income from this business is only Rs. 5,52,848 which is
less than Rs. 6,75,860 (i.e., Rs. 84,48,252 * 8%). In this case can he declare actual income which is lower than the limit prescribed under section 44AD?
**
As per the provisions of section 44AD, if the actual income from the business covered under
section 44AD is lower than the income prescribed under the presumptive scheme, then the
assessee can declare income from aforesaid business at a lower rate (i.e., at less than 8%).
Thus, in this case Mr. Sashank can declare lower income. However, in this case he has to
maintain the books of account prescribed under section 44AA and has to get such books of
account audited, since in this case his actual income exceeds the exemption limit (i.e.,Rs.2,00,000).
 
if the law permits dont get audit done , but if its needed then even small trader will have to get it done

about peanuts , it was not peanuts for me last year , i was in loss last year so audit had to be done .

i am the most ordinary guy with normal mind and lots of loss making years , i hope all trader here make it good that audit is required compulsory year after year , make good money and give honest taxes to govt and fees to CA's :thumb::thumb:
Ha ha
What I want to emphasize that when you can plan legally (like legal tax planning to reduce tax liability), then why to go for a compulsory audit. I will again repeat, what I posted earlier.

I will again repeat what I said previously,
that when we can legally avoid compulsory audit (mainly for small traders), in case of profit being less than 8% of total TO (including options trading and including sale value of option) then why go for illegal means. :)
Yes, give honest taxes to govt (if due legally, and I am neither asking for a wrong declaration of income or TO nor suggesting for tax evasion)
and not otherwise
 

wisp

Well-Known Member
if the law permits dont get audit done , but if its needed then even small trader will have to get it done

about peanuts , it was not peanuts for me last year , i was in loss last year so audit had to be done .

i am the most ordinary guy with normal mind and lots of loss making years , i hope all trader here make it good that audit is required compulsory year after year , make good money and give honest taxes to govt and fees to CA's :thumb::thumb:
Afterall, the IT Dept wants to makes sure no one is cheating the govt. of taxes they owe, not to audit every small loss making business, what purpose would that serve. The point of the audit is if you are declaring <8% profit you still need to get audited if your <8% income from said business is above taxable limit. This has nothing do with income from other businesses or other heads. This is how I am reading it and i think a few auditors too feel the same and thats TDSmasters view as well it seems.

source:http://tdsmaster.com/presumptive-taxation-section-44-ad-income-on-estimated-basis.html
Declaration of lower Income

When actual income of the business is lower than the prescribed limit of 8%, lower income can be declared. The point of consideration is that when income is to be declared at a lower rate and if such income is within taxable range ie. exceeds the maximum amount not chargeable to tax, maintenance of books of accounts will be required as per Section 44AA & further tax audit u/s 44AB will also be required.
 
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canikhil

Well-Known Member
I think the income referred to is the total income from the business:

Illustration
Mr. Sashank is running a stationary mart. The turnover of the business during the previous year 2012-13
is Rs. 84,48,252. His actual income from this business is only Rs. 5,52,848 which is
less than Rs. 6,75,860 (i.e., Rs. 84,48,252 * 8%). In this case can he declare actual income which is lower than the limit prescribed under section 44AD?
**
As per the provisions of section 44AD, if the actual income from the business covered under
section 44AD is lower than the income prescribed under the presumptive scheme, then the
assessee can declare income from aforesaid business at a lower rate (i.e., at less than 8%).
Thus, in this case Mr. Sashank can declare lower income. However, in this case he has to
maintain the books of account prescribed under section 44AA and has to get such books of
account audited, since in this case his actual income exceeds the exemption limit (i.e.,Rs.2,00,000).
as I said, two different things. One if regarding 8% of turnover..this is applied only on business income. But whether audit is applicable or not, also depends on whether total income exceeds the exempted limit or not. So lets say your turnover is 10 lakhs and your actual income from these activities is less than 80K lets say 70K plus you have salary income of lets say 2L, then you are exceeding the limit and therefore either you do tax audit or you declare 80K as income from business.