Suggestions on Section 44AB as proposed to be amended by Finance Bill 2017- Increased threshold for presumptive tax cases under section 44AD – Consequential amendments required in section 194A/ 194H/ 194I & 194J
The Finance Bill, 2017 proposes to amend the section 44AB to exclude the eligible person, who declares profits for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, total turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year, from requirement of audit of books of accounts under section 44AB. The said change is proposed by insertion of a proviso to section 44AB.
It is a welcome amendment. However, consequential amendments are required in sections 194A/ 194H/ 1941/ 194J wherein an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such interest is credited or paid, is liable to deduct income-tax under the respective section(s).
In other words, no consequential amendment has been proposed in sections 194A/ 194H/ 1941/ 194J wherein an individual/HUF is required to deduct tax at source if his/its turnover is exceeding limits specified clause (a) and (b) of section 44AB. The monetary limit as specified under clause (a) is still 1 crore which means that a person is required to deduct tax under the aforesaid sections despite the fact that he has opted for presumptive taxation under section 44AD and his turnover is less than Rs.2 crores, due to which he is not liable to tax audit under section 44AB.
It is suggested that in line with the enhanced limit proposed in section 44AB for a person opting for presumptive taxation under section 44AD, consequential amendment may be made in sections 194A/ 194H/ 194I/ 194J by including reference to the newly inserted proviso to section 44AB.