Sec 44AA:- Maintenance Of Accounts By Certain Persons Carrying On Business Or Profession

• Prescribed Books1: – In case of Specified Profession2 if Gross Receipts exceed Rs.150000/- in all 3 years immediately preceding previous year.
• Any Books of Accounts3: –
  • In case of Specified Profession if Gross Receipts are less than 150000/- in any of 3 years immediately preceding previous year then assessee has to maintain books of accounts.
  • In case of Non Specified Profession if Total income exceed Rs.120000/- or Gross Receipts exceed Rs .1000000/- in any of 3 years immediately preceding previous year.
  •        In case of Non Specified Profession
    if Total income exceed Rs.120000/- or Gross Receipts exceed Rs .1000000/- in any of 3 years immediately preceding previous year.
  • Assessees covered u/s 44AD/44AF/44BB/44BBB are also required to maintain books if they claim that their income will be less than limit specified in respective section. e.g. u/s 44 AD limit is 50 % of Gross Receipt.  
  • Similarly, Assessees opting for presumptive taxation u/s 44AD are required to maintain books if they are covered under sub section 4* of the said section and their total income exceeds basic threshold limit. 
  •       *As per Sub section 4 of Section 44AD, if the assessee, after declaring profit for any previous year u/s 44AD, declares profit for any of the five consecutive succeeding years which is not in accordance with the provisions of Section 44AD he shall not be eligible to claim the benefit of the provisions of this section for five subsequent years succeeding the year in which the profit has not been declared in accordance with the provisions of Section 44AD.
    
    
  • U/s Sec 44 AD maintenance of books is required when two conditions are satisfied:-
    1. Claim lower profit than limit specified u/s 44AD
    2. Total Income exceed basic exemption limit.
    
    
• No Books: – In all other cases.1

1. Books of accounts are required to be maintained for 6 Years from the end of relevant Assessment Year.

Sec 44AB:- Audit Of Accounts Of Certain Persons Carrying On Business Or Profession 

• Audit of accounts is compulsory
  • In case of Business: – If Total Sales/ Gross Turnover exceeds Rs 1 Crore in any previous Year
  • In case of Profession: – If Gross Receipts exceeds Rs 25 Lakh 50 lakhs in any previous Year  (Applicable from FY 2016-17 onwords )
  • Assessees covered u/s 44AD/44AF/44BB/44BBB are also required to audit of accounts if they claim that their profit will be less than limit specified in respective section. e.g. u/s 44 AD Audit of accounts is required when two conditions are satisfied:-
    1. Claim lower profit than limit specified u/s 44AD (Limit of 8%)
    2. Total Income exceed basic exemption limit.
• Similarly, Assessees opting for presumptive taxation u/s 44AD are required to get their accounts audited if they are covered under sub section 4 and their total income exceeds basic threshold limit.
  Above limit is assessee wise and not business /profession wise e.g. If assessee has two business than turnover will be summed up.
• For calculation of turnover u/s 44AB, the turnover u/s 44AD/44AE shall be excluded.
• Above limit is assessee wise and not business /profession wise e.g. If assessee has two business than turnover will be summed up. 
• Audit Date:-
  • Normally 30th September.
  • In case, if assessee has International transactions, 30th November.
• Audit Report Form:- 3CA if audit required under any other law
  3CB if not covered above means covered under Income Tax.

Sec 44AD:- Income Of Any Business Presumed To Be 8 % 

• Applicability:-
  1. Eligible Assessee means Resident:- Individual/HUF/Partnership Firm
     firm
  2. Eligible Business:- All types of business except business covered u/s 44AE/Agency/Commission/Brokerage
  3. Turnover does not exceed Rs 1 Crore (2 crores with effect from FY 2016-17) in Previous Year
     If all above conditions are satisfied then assessee can declare estimated income from business:-
     8% of total turnover or more.
• Non Applicability:-
  1. Non Resident:-Individual/HUF/Partnership firm
     firm (excluding Limited Liability Partnership Firm)
  2. Company/LLP/BOI /AOP
  3. Turnover exceeds Rs 1 Crore (2 crores with effect from FY 2016-17) in Previous Year  
  4. Professional
  5. Assessee has not claimed deductions u/s 10A/10AA/10B/10BA/80HH/80RRB in relevant previous year.
• If Assessee opts for Sec 44AD and declares his income as 8 % of total turnover or more he should consider following points:
  1. Not allowed to claim any expenses or depreciation i.e. expenses covered u/s 30 to 38.
  2. Remuneration or Interest paid to partner u/s 40(b) shall not be allowed as deduction.  
  3. Maintenance of books of accounts u/s 44AA and Audit u/s 44AB not required.
  4. Advance Tax rules will apply, however assessee may opt to pay advance tax by 15th March of Financial Year.
  5. Where an assessee declares profit for any previous year u/s 44AD and he declares profit for any of the five consecutive succeeding years not in accordance with the provisions of this section, he shall not be eligible to claim the benefit of the provisions of this section for five subsequent years succeeding the year in which the profit has not been declared in accordance with the provisions of Section 44AD(1).
  6. If there is disallowance of any expenses it will be assumed that it has been already made in calculation of estimated profit. 
  
  
  Sec 44ADA:- Income Of Any Professional Presumed to be 50% of the Gross Receipts (Applicable from FY 2016-17)
  • Applicability:-
  1. Eligible Assessee means Resident in India:- Individual/HUF/Partnership Firm (excluding Limited Liability Partnership)
  2. Eligible Professions:- Professions referred in Section 44AA of the Act viz. Medical/Legal/Engineering/Architect/Accountancy/Technical Consultancy/Interior Decoration/Authorized Representation/Film Artist/C.S.
  3. Total Income does not exceed Rs 50 Lakhs in Previous Year
  If all above conditions are satisfied then assessee can declare estimated income from business:-
  50% of total gross receipts or more.
  • Non Applicability:-
  Non Resident: Individual/HUF/Partnership Firm
  • If Assessee opts for Sec 44ADA and declares his income as 50% of total gross receipts or more he should consider following points:
  1. Not allowed to claim any expenses or depreciation i.e. expenses covered u/s 30 to 38.
  2. Maintenance of books of accounts u/s 44AA and Audit u/s 44AB not required.
   
• Applicability of Sec 44AA & 44AB:-
  1. 1. Claim lower profit than limit specified u/s 44AD
     2. Total Income exceeds basic exemption limit.
  If assessee claim lower profit but his total income is lower than exemption limit then Sec 44AA & 44AB does not apply.  
  
  
  Example:
    1.    Assessee has two Business

  	Retail	+	Wholesale
  	80 Lakh	+	30 Lakh

  Sec 44AA : Applicable ( Retail and Wholesale both )
  Sec 44AB : Applicable ( since total turnover exceeds 1 Cr.)
  Sec 44AD : No relevance
    2. Assessee has Business & Profession

  a)	Business	+	Profession
  	130 Lakh	+	40 Lakh

  Sec 44AA : Applicable on Business (Assessee may opt for Sec 44ADA for Professional income and 44AA may not be applicable)
  Sec 44AB : Not Applicable on Profession (Assessee may opt for Sec 44AD for Business turnover and 44AB may not be applicable)
  Sec 44AD : Assessee may opt for Sec 44AD for Business (Profession not covered u/s 44AD)

  b)	Business	+	Profession
  	70 Lakh	+	15 Lakh

  Sec 44AA : Applicable for Business (Assessee may opt for Sec 44ADA for Professional income and 44AA may not be applicable)
  Sec 44AB : Not applicable (Turnover is less than Rs 1 crore in business and less than Rs.50 lakhs in profession)
  Sec 44AD : Assessee may opt for Sec 44AD for Business ( Profession not covered u/s 44AD)
    3.    Assessee has three Business

  a)	Retail	+	44AE	+	44AD
  	80 Lakh	+	30 Lakh	+	35 Lakh

  Sec 44AA : Applicable only on retail business.
  Sec 44AB : Applicable on Retail ( Rs. 80 Lakhs) since 44AD is not applicable on retail.
  Sec 44AD : Applicable on 35 LakhsNote:
  In 3(a), it has been assumed that the assessee has profitability below 8% on turnover of Rs. 80 Lacs.
  
  
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• Sec 44AB:- Audit Of Accounts Of Certain Persons Carrying On Business Or Profession
• 
  
• Audit of accounts is compulsory.The Due Date of filing the Tax Audit Report under Section 44AB is 30th Sept. For all other assessee’s who are not liable to get their Tax Audit done under Section 44 AB.An Assessee is liable to get his Tax Audit done by a Chartered Accountant mandatorily, if in the previous year,
• • In case of Business: – If Total Sales/ Gross Turnover exceeds Rs 1 Crore in any previous Year
  • In case of Profession: – If Gross Receipts exceeds Rs 25 Lakh 50 lakhs in any previous Year ( Applicable from Financial Year 2016-17 onwards) 
  • Assessees covered u/s 44AD/44AF/44BB/44BBB are also required to audit of accounts if they claim that their profit will be less than limit specified in respective section. e.g. u/s 44 AD Audit of accounts is required when two conditions are satisfied:-
    1. Claim lower profit than limit specified u/s 44AD (Limit of 8%)
    2. Total Income exceed basic exemption limit.
• Similarly, Assessees opting for presumptive taxation u/s 44AD are required to get their accounts audited if they are covered under sub section 4 and their total income exceeds basic threshold limit.
  Above limit is assessee wise and not business /profession wise e.g. If assessee has two business than turnover will be summed up.
• For calculation of turnover u/s 44AB, the turnover u/s 44AD/44AE shall be excluded.
• Above limit is assessee wise and not business /profession wise e.g. If assessee has two business than turnover will be summed up. 
• Audit Date:-
  • Normally 30th September.
  • In case, if assessee has International transactions, 30th November.
• Audit Report Form:- 3CA if audit required under any other law
  3CB if not covered above means covered under Income Tax.