As per Section 44 AD of Income Tax Act, 1961:-
If an “Eligible Assessee” i.e. an Individual, HUF or Partnership Firm (for detail refer note 1 below) whose gross receipts from the “Eligible Business” (for details refer note 2 below) during the previous year are less than equal to Rs. 1 Crore – then he is required to show at least 8% of his gross receipts or turnover as “Profits and Gains of Business or Profession”.
This is a mandatory section and in case if an eligible assessee claims that his “Profits and Gains of Business or Profession” is less than 8% and his total income exceeds the maximum amount which is not chargeable to income tax, then he is liable to maintain proper books of accounts (as per Section 44AA) and get his accounts audited and furnish a report of such audit as required u/s 44 AB.
Who is not liable for audit u/s 44 AD?
a) If the deemed “Profit and Gains from Business or Profession” of an Eligible Assessee from an Eligible Business is greater than equal to 8% of total turnover or gross receipts.
b) In case of Individuals and HUFs – if the total income of the assessee does not exceeds the maximum amount not chargeable to tax.
c) In case of Partnership Firms – if the total income is less than zero i.e. return of loss.
In case of (b) and (c) above, although the provision of Audit and maintenance of accounts is not mandatory BUT it is suggested to maintain proper books of accounts by the assessee.
NOTES:-
1. “eligible assessee” means,—
(i) an individual, Hindu undivided family or a partnership firm, who is a resident, but not a limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009) 27a ; and
(ii) who has not claimed deduction under any of the sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading “C. – Deductions in respect of certain incomes” in the relevant assessment year;
2. “eligible business” means,—
(i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE; and
(ii) whose total turnover or gross receipts in the previous year does not exceed an amount of [one crore rupees].]