TAR_Applicability_calculator.xlsx

	B	C	D
1			Tax Audit Applicability - Calculator
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3	a		This post is divided into
4		i	Basic
5		ii	Calculator
6		iii	Illustration
7	b		Section 44AB (which consists of 5 clauses) of the Income Tax Act, 1961 (the ITA, 1961) deals with Tax Audit Applicability
8	c		After deciding as to whether Tax Audit is applicable, one has to decide the scope of activities for which Tax Audit is appliable. To illustrate, an entity may be engaged in 3 businesses and 2 professions. It may happen that Tax Audit Reporting requirement is applicable only for one business Activity and one professional activity and not for remaining 2 businesses and remaining one professional activity.
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10	d		Section 44AB of the Income Tax Act, 1961 (the ITA, 1961) deals with Tax Audit Applicability
11	e		It consists of 5 clauses (a) to (e ).
12	f		In the Tax Audit Audit Report, one has to mentioned 'the clause' under which Tax Audit is applicable.
13	g		There is scope for reporting only one clause, but it is a normal phenomenon that prima facie requirements under more than one clause are fulfilled.
14	h		Is it a drafting anomaly..? No.
15	i		Refer to Point No. 12 of the Tax Audit Report which reads as follows
16			Whether the profit and loss account includes any profits and gains assessable on presumptive basis, if yes, indicate the amount and the relevant sections (44AD, 44ADA, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB, 44BBC, Chapter XII-G, First Schedule or any other relevant section.)
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18	j		The triggers for Tax Audit Requirement under section 44AB of the ITA, 1961 can be either of the following:
19		i	Turnover crossing a particular threshold limit = clause (a) and (b)
20		ii	Reporting loss or reporting profit which is less than as prescribed by the Presumptive Taxation scheme [Clause (c ) and (d)]
21		iii	Eligibility (rather non-eligibility) to Presumptive Taxation [clause (e )]
22	k		On reading the law as a whole, one can ascertain the modus operandi to determine 'the clause' under which Tax Audit is Applicable. While doing that, one has to firstly test specifics over general.
23	l		In simple terms, one may follow, following chronology while testing the applicability and capturing the relevant figures
24		i	Clause e
25		ii	Clause c
26		iii	Clause b
27		iv	Clause b
28		v	Clause a
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30	m		One has to note that, there are other sections which also have Presumptive Taxation Scheme but which are specicfically not included in the clause (c ) for example
31		i	Section 44BBA = business of operation of aircraft in the case of non-residents
32		ii	section 44BBC = business of operation of cruise ships in the case of non-residents
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34	Practical Insight in doing work
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36	n		The theory as discussed above and in the other part of the post is important and relevant but at the end of the day, one also needs to do the work. My own (CA) firm is also not an exception for that. Following are some thumb rules which will cover more than 90% of the requirements.
37		i	Approach by way of elimination [Same thing that you did while studying for CA exams..;) Kidding]
38		Understand basic of Presumptive Taxation
39		ii	In general, scenarios covered by clause C are very rare and specific. Those CA firms or even those persons engaged in that activity know what to do.
40		iii	Presumptive Taxation scheme is for any other business or profession is available only for following type of entities who are 'Resident' an individual, Hindu undivided family or (HUF is not covered for profession) a partnership firm, but not LLP
41		iv	Thus, if the assessee is other than as mentioned above, directly test for turn-over criteria depending upon the activity.
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