- Must be a person under Income Tax Act
- Must carry on business or profession
- Must maintain books of account
- Object to earn profit or gain
- Income is taxable or allowable the tax
Applicability of tax audit
- A person carrying on business whose turnover or gross receipt during the financial year exceeds Rs.2 crore. For this purpose the meaning turnover includes Profit on sale of Export License/Duty Drawback/Cash Assistance, Gross interest income received by Moneylender, Exchange rate difference on export sales, Advance received & forfeited from customers, where excise duty is included in turnover, the corresponding amount should be distinctly shown as debit item in the profit and loss account. However, it does not include Sale/Purchase of Fixed Assets, Sale Proceeds of Assets held as Investments, Rental Income, Income by way of Interest unless assessable as business income, Any expense which is reimbursable to the agent by the client.
- A person carrying on a profession and the gross receipt from such profession exceeds Rs. 50 lakhs. For the purpose of income tax, the expression profession includes professions of Accountancy, Architectural, Authorised Representative, Company Secretary, Engineering, Film Artists/Actors, Cameraman, Director, Singer, Story-writer, etc., Interior Decoration, Legal, Medical, Technical Consultancy.