An Overview of New Amendments in IT Section 44AB

Latest Amendments Under Section 44AB

Section 44AB of the Income Tax Act, 1961 was inserted which come into force from the date 1.4.1985 (AY 1985-86) and additional revisions were incurred over time. Currently, the section exists 44AB under the AY 2022-23.

Latest Update

• The CBDT has extended the deadline for filing the accountant’s report in Form 56F for the A.Y. 2023–2024 from the date set under section 44AB to December 31, 2023. Please refer Dated October 20, 2023, CBDT Circular No. 18/2023. Read Circular

An Audit of the Individual’s Accounts Relating Businesses or Professions

According to section 44AB of the Income-tax Act, 1961, every individual needs to be aware of the latest amendments mentioned below:

• Doing the business when the total sales, turnover, or gross receipts, according to the case in the business is more than Rs 1 cr (w.e.f AY 2013-14) in any former year will get his accounts audited via CA prior to the mentioned date and files by the same date when the report of the audit in the specified form duly signed and validated via CA and offset further such details as might be defined.

In the below case the figure of Rs 1 cr is replaced by Rs 10 cr. Given that for the case of the individual whose:

• The aggregate of all the amounts obtained along with the amount obtained for the sales, turnover, or gross receipts in the former year in cash is less than 5% of the specified amount
• The aggregate of all payments incurred along with the amount made towards the expenditure, in cash, is less than 5% of the specified payment.

The clause will have the effect as if for the words “one crore rupees”, the words “[ten] crore rupees” had been replaced.

Given that for the intention of the same clause the receipt of the payment, according to the case through the cheque brought to the bank or by a bank draft that does not account payee, will be deemed to be the payment or receipt, according to the case may be, in cash.

An Individual Who Maintains the Profession Will Get the Accounts Audited When

• Doing on profession will if his gross receipts in the profession are more than Rs 50 lakh in any former year.

If Profits Under Sections 44AE, 44BB, and 44BBB are More than the Profit Shown in the Accounts get Audited

• Doing the business when the profits through the businesses are deemed to be the profits of the same individual under section 44AEor section 44BB or section 44BBB, and he claims, income to be lesser than the profits so deemed to be the profits of his business according to the case in any former year.

If Income is More than the Exemption Limit and the Taxpayer Reveals Lower Profits Under Section 44ADA will get his Accounts Audited

• Doing the profession when the profits via the profession are considered to be the profits of the same individual under section 44ADA and he has claimed the same income to be lesser as compared to the profits which are considered to be the profits of his profession and the is more than maximum amount, not chargeable to income-tax in any prior year.

When the Income is More than the Exemption Limit, the Provision of Sub-Section 4 of Section 44AD Would be Subjected to be Applied, and the Accounts Audited

• Doing the business when the provision of sub-section (4) of section 44AD would be subjected to be applied when the income of the person is more than the maximum amount which is not chargeable to income-tax in any prior year.

Read Also: Presumptive Taxation Scheme Under Section 44AD, 44ADA, 44AE

Income Tax Section 44AD Sub-section (4) is specified as

“where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and declares profit for any of the five assessment years relevant to the previous year succeeding such previous year, not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of the section five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1).”

If the Turnover is not More than Rs 2 cr and the Profit is Shown Under Section 44AD(1), he does not need to get his Accounts Audited.

The same section is applicable to the person who shows the profits for the former year as per the provision of sub-section (1) of section 44AD and his total sales, turnover, or gross receipts, in business is not more than Rs 2 crore in the same former year:

Income Tax Section 44AB Not Applicable As Per Below Proviso

Given that the same section would not be applicable to the individual who generates the income of the nature referred to in section 44B or section 44BBA, on and from the 1st day of April 1985 under the case, the date on which the related section effected from the date, whichever is later.

The below-mentioned proviso specifies that when the books are audited as needed beneath any other law, an audit report will get submitted as obligated beneath the other identical law, and another report on the grounds of the identical books audited as needed beneath other law shall be submitted by Chartered Accountant as needed under this section of Income Tax

Given that for the case in which the same individual is needed by or beneath any additional law to obtain his accounts audited the same would be enough for compliance with the provision of the same section when the same individual gets audited their accounts of the same businesses or audit of the profession beneath the same law prior to the mentioned date and files within the date the audit report as mentioned beneath the same additional law and the other report by an accountant in the form specified beneath the same section.

Explanation-for the purposes of this section,

(I) “Accountant” directed that in the Explanation below sub-section (2) of section 288;

Accountant means a Chartered Accountant

(ii) “Specified date“, concerning the accounts of the taxpayers of the former year related to the assessment year directed that the date one month prior to] the last date to file the income under sub-section (1) of section 139.

Prior to one month for furnishing the return u/s 139(1) in which the books are mandated to get audited; the report of an audit by a CA would get submitted electronically.

Below is the Brief Summary Illustrated

If the Turnover of the Taxpayer is Identical to or Lower than Rs 1 crore

If the turnover is equal to Rs 1 cr or less than that and he or she is not showing the profit under section (1) of section 44AD and is lower than 8% of the sales, he or she would not be needed to get his or her accounts audited according to section 44AB(a) of this act while they are needed to maintain the records of accounts and submit the balance sheet to the department when he or she mentions the profit under income tax section 44AD(1), he or she would not be needed to maintain the books of accounts and would not be filing their balance sheet to the dept via which they are obligated to explain about his or her turnover, equal Rs 1 cr or lower than that.

If the Income of the Taxpayer is Equivalent to or Lower than Rs 2 crore but More than Rs 1 cr

• In the same case when he or she displays the profit as per section 44AD(1) of the act as per proviso to section 44AB of the act, there is no need to get his/her accounts audited while if his/her turnover is less than Rs 2 crores and their profit is lower than that then under section 44AD(1), they would be mandated to get their accounts audited.
• When the turnover is more than Rs 2 cr and the mentioned profit exceeds the needed one u/s 44AD for that case they would need to get their accounts audited u/s 44AB of the act.

If the Assessee’s Turnover is not More than Rs 10 cr, There is Proviso to Income Tax Section 44AB(a)

• From the Assessment year 2020-21 when his or her receipt and cash payments are not more than 5% of the amount correspondingly, he or she would not be needed to get their accounts audited however he or she would be required to maintain the records and furnish the balances sheet to the department.