Good Cas who can file properly

[canikhil]

Guys,

Will cover all the possible scenarios with regards to the audit applicability this weekend.

 

[travi]

Earlier posts so they don't get buried.

When we say 8%-
1)for turnover,8% of 2Crs or 8% of my f&o turnover we are considering?
8% of 2Crs=16L
8% of my f&o turnover 32L=2.56L
8% of my f&o turnover

44AD-
2)if profit is jst 50k or no trades taken whole yr & we jst hv to show some FD interst,do we file ITR4 using 44AD?or some other section?
if under 2.5L no need for audit, and just file NIL return, or normal ITR4 declaring no audit(Books not maintained) incase you need refund TDS from FD etc

mock examples-
3)f&o turnover is 35L,8% of 35L is 2.80L
Profit made is just 1.5L.
Do we need audit?
NO

4)f&o turnover is 35L,8% of 35L is 2.80L
Profit made is 4L
But tax is nil after deduction,Do we need audit?
Yes

5) f&o turnover is 35L,8% of 35 is 2.80L
Profit made is 6.68L
Do we need audit?
No But advisable to maintain books of accounts.

6)f&o turnover is 1.25Cr,8% of 1.25Cr is 10L
Profit made is 14.33L
Do we need audit?
No But advisable to maintain books of accounts bcos since this FY, 1Cr limit is raised to 2Cr. For previous years and late filing audit required.

7)if we have an income above the tax slab(2.5L),we have to do an audit anyhow?
No Audit unless any of your income falls under Business Income.
This includes professionals, freelancers etc
If your income is purely from Salary, Bank Interest (FD etc) or income from one house property(unless loss brought forward) then no Audit required.


8)if we have an income Zero,but turnover is abv 2Crs,we anyhow have to do an audit?
YES, even loss needs audit.
Advantage is that. loss can be carried forward to next year and you can offset against that profit. Loss upto 8yrs can be carried forward if properly audited.

To add to what Travi shaid

in example 5 and 6 ...Travi has advised to maintain books. There is a very important reason for this advice that everyone following this post needs to understand.

Declaring profit at 8% or more without maintaining books is a double edged sword. Because once you choose this option, you need to follow the same for next 5 years. So lets say you choose to declare profits under "no accounts" option for this year and declare profit (under example 6) at 8% ie 10 lakhs or actual profit ie 14.33 lakhs, you will have continue offering profit at atleast 8% or more for next five years regardless of the actual profit or loss. This could really hurt if you earn losses in next years. So lets say your turnover is 1 cr next year but you incur loss of Rs 2 lakhs, you will still have to declare profit of Rs 8 lakhs at least.

So, ideal situation now is this:

1. Maintain books regardless of profit or loss.

2. If the audit becomes applicable on account of

- turnover exceeding Rs 2 cr or
- where the turnover is less than 2 cr but the profit margin is below 8% and the total income exceeds minimum taxable limit (Rs 2.5 lakh at present);

get the audit done.

 

[travi]

Nikhil Bhai's post.

Well the annual tax return season is just about to start and its the right time for you to evaluate whether you are supposed to anything more than just filing your tax returns.

This posts attempts to cover the issue of applicability of tax audit under various circumstances.

Till a few years ago, applicability of tax audit was a simple issue: If your turnover crosses a particular limit, you were required to get your accounts audited. However, since the introduction of refurbished Section 44AD, the applicability of audit has become a cumbersome issue.

So to make it easier for you all to know whether tax audit is applicable to you or not, I have shared below a few simple examples. (these examples have been shared at an earlier discussion in this forum too)

Case 1.

Turnover : Below Rs 1 cr
Gains/Loss from Business: 240000
Salary Income: No
any other income: Nil

Audit not required as condition of income exceeding maximum exemption limit not fulfilled

Case 2

Turnover: below Rs 1 cr
Gains: Rs 50000 (assumed)
Salary: Rs 250000

Audit required as condition of income exceeding maximum exemption limit and profit less than 8% fulfilled

Case 3

Turnover: Below Rs 1cr:
losses: 5 lakhs (assumed)
Interest Income: Rs 5 lakhs

Audit not required as losses will get set off against Interest income resulting in maximum income not exceeding maximum exempted limit.

In the above case, had the interest income exceeded Rs 7.5 lakhs, the audit would have become applicable.

Case 4

Turnover: Below Rs 1 cr

losses 5 lakhs (assumed)

Interest Income: Rs 2.5 lakhs,

Salary: Rs 3 lakhs

Audit required as only Rs 2.5 lakhs losses are set off against interest and remaining losses are to be carried forward (set off against salary not allowed). So income exceeds exempted limit.

Case 5

Turnover: Below Rs 1 cr

Speculative Losses: 2 lakhs

Interest Income : Rs 2.6 lakhs,

Salary: Ni

Audit required as speculative losses cannot be set off against interest income and both the conditions : income exceeding basic exemption limit and profit less than 8% are satisfied.

Case 6:

Turnover : Above Rs 1 cr. Don't bother. Audit is compulsory.

Kindly note that in the above examples it has been assumed there are no deductions available under section 80C, 80D etc.

Regards

Nikhil Kaushik

 

[aja]

B is correct , as profit is less than 8% of business turnover , so audit required as per section 44AB
interest income is separate not added into it
(there are some articles in taxguru and similar website)
http://taxdesign.in/comutation-of-turnover-and-examples-to-clarify-applicability-of-section-44ad/

Dont get confused with different links Ravi Bhai.
Simple Rule-
If Profit is less that 8%=Audit is required
If Profit is greater that 8%=Audit is not required.(But it should not cross 2Crs limit of 44AD,thats the thumb rule)

Even if we keep interest income separate,If profit from from all the sources is greater that 8% then Audit is not required.

 

[canikhil]

Dear All,

Please understand that 44AD has been significantly revised last year. So kindly avoid referring to my earlier post. I will post on the basis of law as it stands today over the weekend.

 

[TraderRavi]

Dear All,

Please understand that 44AD has been significantly revised last year. So kindly avoid referring to my earlier post. I will post on the basis of law as it stands today over the weekend.

thanks , lets see whats new

 

[aja]

Where are you Nikhil Bhai?Please upload latest Audit rules as per Section 44AD.

 

[aja]

Is this statement correct that-

If income comes under professional income then you are required to maintain books of accounts(AY 2016-17 onwards)
Stock Trading fall under the head Professional Income,be it Speculative Income or F&O Income?

Pls Confirm.

 

[aja]

Is this statement correct that-

If income comes under professional income then you are required to maintain books of accounts(AY 2016-17 onwards)
Stock Trading fall under the head Professional Income,be it Speculative Income or F&O Income?

Pls Confirm.

So even if you have 2L income,you have to undergo an audit.
(My friend confused me here.His CA's views are like that)

 

[Smart_trade]

Keeping books of accounts and getting audit done are two different things.Books of accounts every business person should keep.

Smart_trade