Aug 282018
 

Tax audit limit under income tax act

Meaning of Tax Audit:

44AB. Every person,—

  1. Carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year; or
  2. carrying on profession shall, if his gross receipts in profession exceed fifty lakh rupees in any previous year; or
  3. carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AEor section 44BB or section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or
  4. carrying on the profession shall, if the profits and gains from the profession are deemed to be the profits and gains of such person under section 44ADAand he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his profession and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year; or
  5. carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,

get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed :

The audit conducted as above is commonly known as TAX AUDIT.

Since requirement as to audit is depend upon total sales, turnover or gorss receipt and hence here an attempt is being made to understand these term.

Meaning to terms turnover as commonly understood:

The aggregate amount for which sales are effected or services rendered by an enterprise. The term `gross turnover’ and `net turnover’ (or `gross sales’ and `net sales’) are sometimes used to distinguish the sales aggregate before and after deduction of returns and trade discounts.

Inclusion and exclusion in sales value / Gross receipts:

Value of Turnover
Inclusion in turnover value Exclusion from turnover value
(a)   Scrap sales

(b)   Sale of By products

(c)   Sale of securities held as stock in trade

(d)   Cash discounts not included in invoices

(e)   Commission on sale

(f)    Indirect taxes included in sales price

(g)   Packing, freight and forwarding etc. included in sales price

(h)   Brokerage income in case of share broker

(i)    In case speculation – Aggregate of both positive and negative differences arising from the difference between purchase and sale transactions

(j)    In case of agency business – commission earned by agent

(a)    Indirect taxes – Like GST

(b)    In case of composition suppliers sales attributable to GST shall be excluded.

(c)    Sale of fixed assets

(d)    Sale of investment property

(k)   Sale of securities held as investment

(e)    Discount allowed in invoice

(f)     Turnover discount

(g)    Packing, freight and forwarding etc. mentioned separately in the invoice

(h)    Sales return

(i)     Price adjustment

(j)     Special rebate

Value of Gross receipts
Inclusion in Gross receipts Exclusion from Gross Receipts
Gross receipts in case of profession would include all receipts arising from carrying on of the profession Re-imbursement of expenses if collected separately either in advance or otherwise, should not form part of the “gross receipts”.

Sensys Technologies

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