Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Turnover is the first test
The primary tax-audit trigger is turnover, not profit. If your turnover crosses the Section 44AB limit, a tax audit is required whether you made a profit or a loss. So a loss-making but high-turnover business still needs an audit.
The presumptive opt-out trap
The trickier case is presumptive taxation. If you were eligible for presumptive tax (44AD/44ADA) but declare profits lower than the deemed percentage (or a loss) and your total income exceeds the basic exemption limit, you are required to maintain books and get a tax audit — even below the turnover limit. This catches many small businesses claiming a loss. Confirm the current 44AD/44ADA conditions.
A worked example
Example: a trader with ₹90 lakh turnover declares a small loss — below the audit turnover limit, but because he opts out of 44AD and his income (from other sources) exceeds the exemption, an audit is triggered. A salaried person with a ₹2 lakh share-trading loss and no business need not audit. The interaction of presumptive rules and losses is where it gets technical. Our team can determine whether you need an audit.