Tax Audit Limit AY 2017-18 for Presumptive Taxation

By | February 4, 2017
(Last Updated On: March 3, 2017)

Tax Audit Limit for Presumptive Taxation w.e.f AY 2017-18

Summary – Tax Audit Limit AY 2017-18  :As per Finance Bill 2017 , w.e.f 01.04.2016 FY 2016-17 (AY 2017-18) Section 44AB  an eligible person opting for presumptive taxation scheme as per section 44AD(1) shall not be required to get his accounts audited if the total turnover or gross receipts of the relevant previous year does not exceed 2 crore rupees.

Reasons for this amendment: The Finance Act, 2016 had increased the threshold limit under Section 44AD for presumptive taxation scheme from Rs 1 Crore to Rs 2 Crore. However, corresponding amendment was not made in Section 44AB. In other words, the threshold limit for the tax audit under Section 44AB was not increased to Rs  2
Crores for the taxpayers opting for the presumptive scheme. Therefore, in order to bring the provisions in parity Section 44AB is proposed to be amended

CBDT Press Release on tax Audit Limit 

CBDT press release dated 20.06.2016 clarifying that higher threshold limit upto Rs 2 Crore for non-audit of accounts has been given only to assesses opting for presumptive taxation scheme u/s 44AD of the Act.

In other words, it means that turnover / total sales / gross receipt level fixed to be greater than Rs.1 crore attracting tax audit provisions u/s 44AB of the Act still prevails but assesses who claim benefit of section 44AD of the Act can avoid tax audit upto the total turnover limit of Rs. 2 crores even.  [ read CBDT Press Release- Tax Audit limit of Rs 2 Crore apply only to presumptive taxation scheme ]

Tax Audit LimitSection 44ADSection 44AB
No need for Tax auditIf turnover or gross receipts of the assessee from business does not exceed Rs. 2 crore  and Assessee declare Profit from Business @ 8% of total turnover or gross receiptsi) If turnover or gross receipts of the assessee from business does not exceed Rs. 1 crore

ii) If turnover or gross receipts of the assessee from Profession does not exceed Rs 50 Lakh

 

When Liable for Tax Audit

 

If turnover or gross receipts of the assessee from business does not exceed Rs. 2 crore  but he declare profit Less than 8% of total turnover or gross receipts) If turnover or gross receipts of the assessee from business exceed Rs. 1 crore

ii) If turnover or gross receipts of the assessee from Profession  exceeds Rs 50 Lakh

) If turnover or gross receipts of the assessee from business does  exceed Rs. 1 crore  but he declare profit Less than 8% of total turnover or gross receipts  (if this exceeds Rs 250000)

 

Eligible BusinessAny business except the business of plying, hiring or leasing goods carriages referred to in section 44AEEvery business
Who can claimAn individual, Hindu undivided family or a partnership firmEvery person
Who Can not Claimi)                    Company /AOP/ Limited Liability partnership

ii)                   person carrying on profession u/s 44AA

iii)                 person earning income in the nature of commission or brokerage

iv)                 a person carrying on any agency business.


Explnatory Memorandum to Budget 2017-18 on Tax Audit Limit AY 2017-18  for Presumptive Taxation

Exclusion of certain specified person from requirement of audit of accounts under section 44AB

The existing provision of section 44AB of the Act, inter-alia provides that every person carrying on the business is required to get his accounts audited if the total sales, turnover or gross receipts in the previous year exceeds one crore rupees. The threshold limit for applicability of presumptive taxation in case of eligible business carried on by eligible person under section 44AD was increased to two crore rupees from one crore rupees with effect from 1st April, 2017 relevant to Assessment year 2017-18 by Finance Act, 2016. Further vide press release dated 20th June, 2016, it was clarified that if an eligible person opts for presumptive taxation scheme as per section 44AD(1) of the Act, he shall not be required to get his accounts audited if the total turnover or gross receipts of the relevant previous year does not exceed two crore rupees.

In light of the above legislative changes and to reduce the compliance burden of the small tax payers and facilitate the ease of doing business, Finance Bill 2017 proposed 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.

This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent years.

[Clause 20]

Extract of Relevant Clause 20 of Finance Bill 2017 on Tax Audit Limit AY 2017-18

Amendment of section 44AB.

20. In section 44AB of the Income-tax Act,—

(i) before the first proviso, the following proviso shall be inserted, namely:—

“Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year:”;

(ii) in the first proviso, for the words “Provided that”, the words “Provided further that” shall be substituted;

(iii) in the second proviso, for the words “Provided further”, the words “Provided also” shall be substituted.

Related Post on Budget 2017-18

Budget Speech 2017-18 -Download /Print

Finance Bill 2017 -Download /Print -Budget 2017-18

Memorandum Explaining Provisions in Finance Bill 2017

Updates  on Union Budget 2017-18

Related Books on Budget 2017-18

Tax Audit Limit AY 2017-18

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