Tax Audit Applicability & Persons not eligible for the Presumptive Taxable Scheme By Deepti Garg


Persons Eligible for Tax Audit:

  • As per the provision of Section 44AB, any person having income or turnover from business exceeding Rs. 200 Lakhs or gross receipt from profession exceeding Rs. 50 Lakhs is required to get his accounts audited under the Income Tax Act, 1961.
  • A person registered under Sec. 44AE claims that the profits or losses from the business are lower than that computed on the presumptive basis. In such a case, the normal monetary limit for tax audit shall not apply.
  • A person registered under Sec. 44AD who claims that the profits or losses from such a profession are lower than that computed on the presumptive basis and his income exceeds the basic exemption limit.
  • A person registered under Sec. 44ADA, whose income increases the basic exemption limit.

Sec. 44AD

The presumptive taxation scheme under Section 44AD cover all small businesses with total turnover/ gross receipts of up to Rs. 200 Lakhs.

The presumptive rate of tax is 8% of income or turnover.

The rate will be 6% of income or turnover if the amount received:

  • By an account payee cheque or
  • by an account payee bank draft or
  • by use of electronic clearing system through a bank account

during the previous year or before the due date of filing of return in respect of that previous year.

Those opting for this scheme are not required to prepare books of accounts.

The eligible assessee is required to pay advance tax by the 15th march of the financial year.

Persons not eligible for the presumptive taxable scheme:

  • Person carrying on professions like medical, legal, engineering or architecture, the profession of accountancy or technical consultancy.
  • Income is in the nature of commission or brokerage
  • Income from agency business

Sec. 44ADA

The presumptive taxation scheme under Section 44ADA cover all small businesses with total gross receipts of up to Rs. 50 Lakhs.

The presumptive rate of tax is 50% of income or gross receipts.

The eligible assessee is required to pay advance tax by the 15th march of the financial year.

Charitable Trust

Income derived from property held under trust or of an institution (‘trust’) wholly for a charitable/ religious purpose is exempt if 85% of the income is spent on the objects of the trust, during the year. If the amount spent is less than 85% of the income, the shortfall is taxable, unless the trust has complied with the conditions mentioned in the table below.

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