Navigating tax audit requirements under the Income Tax Act, particularly Section 44AB, is crucial for businesses and professionals to ensure compliance and avoid penalties. Here’s a detailed chart outlining thresholds, presumptive income rules, and conditions for exemption from tax audits:
| Category | Threshold for Tax Audit | Additional Conditions for Exemption from Tax Audit |
|---|---|---|
| Business Turnover | Exceeds Rs. 1 crore | - Turnover does not exceed Rs. 2 crores and income declared at 8% (or 6% for non-cash) |
| - From April 1, 2024: Cash receipts ≤ 5% of turnover, limit increases to Rs. 3 crores | ||
| - Cash transactions (receipts + payments) ≤ 5% of total turnover, limit to Rs. 10 crores | ||
| Presumptive Income under Section 44AD | - | - Not applicable if income declared under Section 44AD (8% of turnover) |
| Special Cases for Business | Deemed income under Sections 44AE, 44BB, 44BBB | - If income declared lower than deemed profits under these sections |
| Professionals | Gross Receipts exceed Rs. 50 lakhs | - From April 1, 2024: Cash receipts ≤ 5% of gross receipts, limit increases to Rs. 75 lakhs |
| Presumptive Income under Section 44ADA | - | - Not applicable if income declared under Section 44ADA (50% of gross receipts) |
| Special Cases for Professionals | Deemed income under Section 44ADA | - Income declared lower than deemed profits and exceeds non-taxable limit |
| Other Conditions | Compliance with other audit requirements | - If required under any other law and audit conducted before specified dates |
Detailed Analysis:
Business Turnover:
- Tax audit required if turnover exceeds Rs. 1 crore.
- No audit needed if turnover is up to Rs. 2 crores and income declared at 8% (or 6% for non-cash receipts).
- From April 1, 2024, turnover can be up to Rs. 3 crores without audit if cash receipts are ≤ 5% of turnover.
- For turnover up to Rs. 10 crores, audit not required if cash transactions (receipts + payments) ≤ 5% of total turnover.
Presumptive Income under Section 44AD:
- Applicable to eligible businesses (except those in specified sectors).
- Presumptive income deemed at 8% of turnover.
- If income declared under Section 44AD, tax audit under Section 44AB generally not required.
Special Cases for Business:
- Tax audit required if income deemed under Sections 44AE (goods carriages), 44BB (non-resident shipping business), or 44BBB (non-resident aircraft operation) and income declared lower than deemed profits.
Professionals:
- Tax audit required if gross receipts exceed Rs. 50 lakhs.
- From April 1, 2024, gross receipts can be up to Rs. 75 lakhs without audit if cash receipts are ≤ 5% of gross receipts.
Presumptive Income under Section 44ADA:
- Applicable to eligible professionals.
- Presumptive income deemed at 50% of gross receipts.
- If income declared under Section 44ADA, tax audit under Section 44AB generally not required.
Other Conditions:
- Compliance with audit requirements under any other law suffices if audit conducted before specified dates.
Understanding these thresholds and conditions helps businesses and professionals in India manage their tax obligations effectively.
