Section 44AA: Maintenance of Books of Accounts
Section 44AB : Audit of Accounts
Section 44AD : Presumptive Taxation for Business
Section 44ADA – Presumptive Taxation for Professionals
FAQs on Maintenance of accounts by certain persons carrying on profession or business under Income Tax Act, 1961
WHO SHOULD MAINTAIN:

Person carrying on business / profession whose total income exceeds INR 1,20,000 in any one of the three years immediately preceding the previous year; In case of in case of individual or HUF provisions are applicable in case total income exceeds INR 2,50,000.
Person carrying on business / profession whose gross receipts exceeds INR 10,00,000 in any one of the three years immediately preceding the previous year; In case of in case of individual or HUF provisions are applicable in case total gross receipts exceeds INR 25,00,000.
In case of newly set up business, the person is required to maintain books of accounts if his total income or gross receipts is likely to exceed INR 1,20,000 or INR 10,00,000 respectively.
Note: limits of 1,20,000 should be increased to 1,50,000 for professions notified in rule 6F. In case of in case of individual or HUF provisions are applicable in case total income or gross receipts exceeds INR 2,50,000 or INR 25,00,00.,

Where assessee is showing profit under presumptive taxation u/s 44AE, 44BB, 44BBB, he is showing lower profit than prescribed in those sections .
Where assessee is showing profit under presumptive taxation u/s 44AD , he is showing lower profit than prescribed in that section and his income exceeds the maximum amount which is not chargeable to income tax in any previous year.


BOOKS TO BE MAINTAINED:

Cash book;
Ledger;
Journal;
Carbon copy of bills and receipts issued by the person in relation to sums exceeding INR 25000;
Original bills and receipts issued by the person in respect of expenditure incurred in relation to sums exceeding INR 50,000.
Section 44AB : Audit of Accounts


WHO HAVE TO MAKE HIS ACCOUNT AUDITED??

Person carrying on business and total sales, turnover or gross receipts has exceeds INR 1 crore in any previous year;
Person carrying on profession and gross receipts has exceeds INR 50 Lakhs in any previous year;
Where assessee is showing profit under presumptive taxation u/s 44AE, 44BB or 44BBB lower profit than prescribed under those sections.
Where assessee is showing profit under section 44ADA and he claims income to be lower than profit and gains prescribed under those section and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year;
Person carrying on business to which provisions of section 44AD (4) are applicable and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year.


Section 44AD : Presumptive Taxation for Business
It is only for individual, HUF and partnership firm (not LLP) carrying on business except business u/s 44AE.
Total turnover in the previous year should not exceed INR 40 Lakhs.
Assessee can declare 8% or higher sum of his gross receipt as his income under this section and he has no need to maintain accounts or get the accounts audited.
So if assessee is declaring lower income than 8% and his total income exceeds the maximum amount which is not chargeable to income-tax, he is required to get his accounts audited by CA u/s 44AB.
Assessee cannot get deduction u/s 10A, 10AA, 10B, 10BA or deduction under any provisions of chapter VIA. He can get deduction u/s 80c to 80G.
All deduction u/s 30 to 38 shall be deemed to have been allowed.
Written down value of assets shall be deemed to be calculated as if assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant .
Salary and interest of the partners are to be allowed after calculated profit under this section.


Section 44ADA – Presumptive Taxation for Professionals
Section 44ADA is applicable to persons engaged in profession referred in section 44AA (1);
Total receipts should not exceed INR 50,00,000 in a previous year;
Profits and gains would be sum equal to 50% of total gross receipts or a sum higher than the aforesaid sum claimed to have been earned by the assessee;
All deduction u/s 30 to 38 shall be deemed to have been allowed.
Written down value of assets shall be deemed to be calculated as if assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant .
If the assessee claims to have profits and gains from the profession to be lower than the profits and gains specified above and the total income exceeds the maximum amount which is not chargeable to income tax, in such case the assessee is required to get his accounts audited under section 44AB.

 

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.
Assessees covered u/s 44ADA/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 ADA limit is 50% of Gross Receipt.
U/s Sec 44 ADA maintenance of books is required when two conditions are satisfied:-
Claim lower profit than limit specified u/s 44ADA
Total Income exceed basic exemption limit.
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.
No Books: –In all other cases.1
1Prescribed Books means:- Cash Book, Journal, Ledger etc. In case of Medical Profession, Daily Case registers in Form No. 3C and Stock Register are also to be maintained.
2Specified Profession means: – Medical/Legal/Engineering/Architect/Accountancy/Technical Consultancy/Interior Decoration/Authorized Representation/Film Artist/C.S.

3Any Books of Accounts means:-Books which enables A.O. to compute Assessee’s Total Income.

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
Assessees covered u/s 44ADA/44AE/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 ADA Audit of accounts is required when two conditions are satisfied:-
Claim lower profit than limit specified u/s 44ADA (Limit of 50%)
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.
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
In case, if assessee has International transactions, 30th
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:-
Eligible Assessee means Resident:-Individual/HUF/Partnership Firm
Eligible Business:-All types of business except business covered u/s 44AE/Agency/Commission/Brokerage
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:-
Non Resident:-Individual/HUF/Partnership firm (excluding Limited Liability Partnership Firm)
Company/LLP/BOI /AOP
Turnover exceeds Rs 1 Crore (2 crores with effect from FY 2016-17) in Previous Year
Professional
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:
Not allowed to claim any expenses or depreciation i.e. expenses covered u/s 30 to 38.
Salary, Remuneration or Interest paid to partner u/s 40(b) shall not be allowed as deduction.
Maintenance of books of accounts u/s 44AA and Audit u/s 44AB not required.
Advance Tax rules will apply, however assessee may opt to pay advance tax by 15th March of Financial Year.
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).
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:-
Eligible Assessee means Resident in India:- Individual/HUF/Partnership Firm (excluding Limited Liability Partnership)
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.
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:
Not allowed to claim any expenses or depreciation i.e. expenses covered u/s 30 to 38.
Maintenance of books of accounts u/s 44AA and Audit u/s 44AB not required.
Applicability of Sec 44AA & 44AB:-
Claim lower profit than limit specified u/s 44ADA
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:

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

Business I + Business II
90Lakh + 120Lakh

Sec44AA : Applicable (Business I + Business II)

Sec44AB : Applicable(Turnover exceeds 1Crore)

Sec44AD : Not applicable (Turnover of both the businesses taken together exceeds 2Crore)

Assessee has Business & Profession
a) Business + Profession
130 Lakh + 40 Lakh
Sec 44AA : Not Applicable on Business (Assessee may opt for Sec 44ADA for Professional income and 44AD for Business income.)
Sec 44AB : Not Applicable (Assessee may opt for Sec 44AD for Business turnover and 44ADA for Professional turnover.)
Sec 44AD : Assessee may opt for Sec 44AD for Business (Profession not covered u/s 44AD)

Sec 44ADA : Assessee may opt for Sec 44ADA for Profession.

b) Business + Profession
70 Lakh + 15 Lakh
Sec 44AA : Not 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)

Sec 44ADA : Assessee may opt for Sec 44ADA for Profession.

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 Lakhs
Note: In 3(a), it has been assumed that the assessee has profitability below 8% on turnover of Rs. 80 Lacs.

 

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