Sec 44AA:- Maintenance Of Accounts By Certain Persons Carrying On Business Or Profession
- Prescribed Books: - In case of Specified Profession if Gross Receipts exceed Rs.150000/- in all 3 years immediately preceding previous year.
- Any Books of Accounts: -
- 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 44AD/44AE/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 8 % of Gross Receipt.
- U/s Sec 44 AD maintenance of books is required when two conditions are satisfied:-
- Claim lower profit than limit specified u/s 44AD
- Total Income exceed basic exemption limit.
- No Books: - In all other cases.
Prescribed 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.
Specified Profession means: - Medical/Legal/Engineering/Architect/Accountancy/Technical Consultancy/Interior Decoration/Authorized Representation/Film Artist/C.S/Information Technology.
Any 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
Recommended Reading:- Decoding Form 3CD
- 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 in any previous Year.
- Assessees covered u/s 44AD/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 AD Audit of accounts is required when two conditions are satisfied:-
- Claim lower profit than limit specified u/s 44AD (Limit of 8%)
- Total Income exceed basic exemption 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 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:-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 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.
- Company/LLP/BOI /AOP.
- Turnover exceeds Rs 1 Crore 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.
- Remuneration or Interest paid to partner u/s 40(b) shall be allowed as deduction.
- Maintenance of books of accounts u/s 44AA and Audit u/s 44AB not required.
- Advance Tax rule does not apply.
- If there is disallowance of any expenses it will be assumed that it has been already made in calculation of estimated profit.
- Applicability of Sec 44AA & 44AB:-
- Claim lower profit than limit specified u/s 44AD
- 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 | ||
| 80 Lakh | + | 30 Lakh |
Sec 44AA : Applicable ( Business and Profession both )
Sec 44AB : 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 ( Business and Profession both )
Sec 44AB : Not applicable (Turnover is less than Rs 1 crore in business and less than Rs.25 turnover and 44AB may not be applicable)
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 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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