Traders - Compliances under Revised 44AD

canikhil

Well-Known Member
#1
In the last year's budget, govt of India amended the section 44AD.

This current post covers the revised tax positions based on the section 44AD as it stands post amendments:

Key changes are as under:

1. The turnover limit under 44AD now stands at Rs 2 CR

2. Once you choose an option ie declaring profit in excess of 8% of declaring profit less than 8% and going for audit, such an option has to be uniformly applied for next 5 assessment years too.

At present the applicability of maintenance of books of accounts and audit is as under:

1. Your turnover is in excess of Rs 2 cr - audit abd maintenance of books is compulsory irrespective of profit or loss.

2. Your turnover is less than 2 cr but you either earn profit is equivalent or in excess of 8% of turnover or even if your profit is less than 8% of turnover but you decide to declare profit equivalent or in excess of 8% of turnover - No audit is applicable

3. Your turnover is less than 2cr but you earn profit less than 8% of the turnover and do not want to declare higher profit and your TOTAL INCOME is LESS than EXEMPTED LIMIT- You need not maintain books of accounts. No Need to get the books audited.

4. Your turnover is less than 2cr but you earn profit less than 8% of the turnover and do not want to declare higher profit and your TOTAL INCOME is MORE than EXEMPTED LIMIT- You have to maintain books of accounts and get the books audited.

The above should cover all possible scenarios.

For clarification, Total Income is Income before deductions like 80C deductions.

Books of Accounts should include:

1. Documentation including contract notes, margin statements etc

2. Ledger including margin accounts, accounting representation of buy and sell transactions, bank statement, other accounts as may be applicable to specific cases like loan account, interest paid, etc etc

3. Profit & Loss Account, Balancesheet, Trail Balance.

Please note that different CAs and lawyers can have a different opinion on questions of law. Whatever opinion you may agree to, please ensure that you have verified your position to the extent possible.
 

VJAY

Well-Known Member
#2
In the last year's budget, govt of India amended the section 44AD.

This current post covers the revised tax positions based on the section 44AD as it stands post amendments:

Key changes are as under:

1. The turnover limit under 44AD now stands at Rs 2 CR

2. Once you choose an option ie declaring profit in excess of 8% of declaring profit less than 8% and going for audit, such an option has to be uniformly applied for next 5 assessment years too.

At present the applicability of maintenance of books of accounts and audit is as under:

1. Your turnover is in excess of Rs 2 cr - audit abd maintenance of books is compulsory irrespective of profit or loss.

2. Your turnover is less than 2 cr but you either earn profit is equivalent or in excess of 8% of turnover or even if your profit is less than 8% of turnover but you decide to declare profit equivalent or in excess of 8% of turnover - No audit is applicable

3. Your turnover is less than 2cr but you earn profit less than 8% of the turnover and do not want to declare higher profit and your TOTAL INCOME is LESS than EXEMPTED LIMIT- You need not maintain books of accounts. No Need to get the books audited.

4. Your turnover is less than 2cr but you earn profit less than 8% of the turnover and do not want to declare higher profit and your TOTAL INCOME is MORE than EXEMPTED LIMIT- You have to maintain books of accounts and get the books audited.

The above should cover all possible scenarios.

For clarification, Total Income is Income before deductions like 80C deductions.

Books of Accounts should include:

1. Documentation including contract notes, margin statements etc

2. Ledger including margin accounts, accounting representation of buy and sell transactions, bank statement, other accounts as may be applicable to specific cases like loan account, interest paid, etc etc

3. Profit & Loss Account, Balancesheet, Trail Balance.

Please note that different CAs and lawyers can have a different opinion on questions of law. Whatever opinion you may agree to, please ensure that you have verified your position to the extent possible.
:thumb::clapping:
Thanks Nikhilji for this valuable informations and hope it cleared everyones doubt about this Audit part....We are fortunate that having you as guide in taxation things in traderji :thumb:
 

aja

Well-Known Member
#3
Big Thanks Nikhil Bhai for clearing a very repeatedly asked doubt which every trader has in their mind.

:thanx:
 

aja

Well-Known Member
#5
Nikhil Bhai,I have one question-

with turnover less than 2 cr, if you declare profit equivalent or more than 8% of turnover, no audit is required.
When we declare 8%,do we need proof/Book of accounts to be furnish to claim this benefit?
What is the meaning of declare here?
Does declaring means we dont have actual 8% profit made?
We are just making it up to save ourself from audit,am I right?

In this case,we dont need to maintain any books of account,is my understanding is correct?

Thanks

PS-

My Turnover is 20L,8% of 20L=Rs 1.60L
But profit is less 8%

Now,I'm declaring Rs 1.60L as a profit+Rs 90,000 as FD Interest and filling a return.
In such a case do I need to maintain books of account?
Will AO/ITO will trouble me asking ki Rs1.65L profit kaise aaya?Because in actual legder,P&L statement,you can clearly see my loss.

This doubt is troubling me a lot from last night.

Please clear it for me.
 
Last edited:
#6
Nikhil sir , I have seen people declaring less turnover & than declaring 8% profit on the manipulated turnover to get audit exemption . So what are the implications of doing this practice , when

(1) the person is having profit < 8% of actual turnover
(2) the person is having loss

Thanks
 

canikhil

Well-Known Member
#7
Nikhil Bhai,I have one question-





What is the meaning of declare here?
Does declaring means we dont have actual 8% profit made?
We are just making it up to save ourself from audit,am I right?

In this case,we dont need to maintain any books of account,is my understanding is correct?

Thanks

PS-

My Turnover is 20L,8% of 20L=Rs 1.60L
But profit is less 8%

Now,I'm declaring Rs 1.60L as a profit+Rs 90,000 as FD Interest and filling a return.
In such a case do I need to maintain books of account?
Will AO/ITO will trouble me asking ki Rs1.65L profit kaise aaya?Because in actual legder,P&L statement,you can clearly see my loss.

This doubt is troubling me a lot from last night.

Please clear it for me.
What I mean by declare is that you declare that profit in your tax return.

So, if your turnover is 50 Lakhs and you show profit under 44AD equal to 4 lakhs or more, no audit or books of accounts is required. (as mentioned earlier this is applicable only when your turnover is below Rs 2 cr)

In your case as along as the profit is Rs 1.6 lakhs, AO cannot ask any question. However, in such cases my suggestion is that you always declare exact 8%. Because then your reply is simple "i don't know what my profit is...i declared on presumptive basis" if you declare more than 8% then the question of how you arrived at that figure is relevant.
 

canikhil

Well-Known Member
#8
Nikhil sir , I have seen people declaring less turnover & than declaring 8% profit on the manipulated turnover to get audit exemption . So what are the implications of doing this practice , when

(1) the person is having profit < 8% of actual turnover
(2) the person is having loss

Thanks
I have no suggestion to offer in cases where people are declaring less turnover...it is a misrepresentation under Income-tax act and is liable for penalty under the act.
 

wisp

Well-Known Member
#9
I have no suggestion to offer in cases where people are declaring less turnover...it is a misrepresentation under Income-tax act and is liable for penalty under the act.
How is it even possible to declare less turnover when everything is tied to PAN at the broker/NSE?
 
#10
I have no suggestion to offer in cases where people are declaring less turnover...it is a misrepresentation under Income-tax act and is liable for penalty under the act.
Sir , please tell all the implications from first to last , as some of my friends CA's have done this without their knowledge & they have checked it after filing & we had discussions regarding the same .

So , I request you to share all the implications that may arise .

Thank you
 

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