Sec 44AA & 44AB & 44AD of Income Tax Act, 1961

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:-
1. Claim lower profit than limit specified u/s 44ADA
2. 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
1
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.
2
Specified Profession means: Medical/Legal/Engineering/Architect/Accountancy/Technical
Consultancy/Interior Decoration/Authorized Representation/Film Artist/C.S.
3
Any Books of Accounts means:-Books which enables A.O. to compute Assessees Total Income.
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
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:-
1. Claim lower profit than limit specified u/s 44ADA (Limit of 50%)
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.
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:-
1. Eligible Assessee means Resident:-Individual/HUF/Partnership 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 (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. Salary, 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 44ADA
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.
1. Assessee has two Business

2. 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. 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)
1. 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.
1.
1. 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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