Income Tax Act 2025: Low Profit Declaration Now Requires Tax Audit:

Income Tax Act 2025: Low Profit Declaration Now Requires Tax Audit BACKGROUND Under the Income Tax Act 1961, while calculating the income from profits & gains from business & profession. TAX Audit was not applicable if an Assessee declares a profit less than 6%/8% under normal Business without opting for presumptive taxation under Section 44AD, provided that T/O is within the ambit of 44AB and the Assessee maintained Books.

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But the Question is whether this can be done under the new Income Tax Act 2025. Let’s decode it: SECTION 63: TAX AUDIT (IT ACT-2025) (Similar to 44AB) Under section 63 of the Income Tax Act 2025, a tax audit will be triggered under two cases, as illustrated below:

1. Every person whose

(a) Business T/O exceeds Rs 1 crore in the tax year sub to (b) (b) Business T/O exceeds Rs. 10 crores (provided cash transactions do not exceed 5% of total transactions). (c) Profession Gross receipts exceed 50 lakhs in the tax year

2. If the person is carrying on a business or profession referred to in section 58(2) or 61(2) (Table: Sl. Nos. 4 and 5) and the profits and gains from such business or profession are claimed to be lower than the deemed profits as referred to in the said sections.

Such Section won’t applicable where the computation of profits & gains from Business & professions is declared by the Assessee as per Section 58(2) or 61(2) (i.e. Presumptive Basis) Section 58: Special provision for computing profits and gains of a business or profession on a presumptive basis in the case of certain residents.

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(Similar to section 44AD/ADA/AE under IT ACT 1961)

Sl. No.	Category of Business / Profession	Turnover / Gross Receipts Limit	Assessee	How Profit is Computed (Manner of Computation)
1	Any Business (General)[Sl. No. 1]	Option A: Up to ₹2 croreOption B: Up to ₹3 crore (only if cash receipts ≤ 5%)	Eligible assessee.	Choose HIGHER of: ▸ A) Aggregate of: • 6% of turnover received via banking/online mode • 8% of the remaining turnover (received by other modes) ▸ B) Actual profit earned (if higher than above)
2	Goods Carriage Business (Plying / Hiring/ Leasing)[Sl. No. 2]	No turnover limit specified for this category	An assessee, who owns not more than ten goods carriages at any time during the tax year	Choose HIGHER of: ▸ A) Fixed rate per vehicle: HEAVY GOODS VEHICLE (GVW > 12,000 kg): ₹1,000 per TON of GVW or unladen weight × months owned in year OTHER GOODS VEHICLES (GVW ≤ 12,000 kg): ₹7,500 per vehicle × months owned in year (part-month = full month) ▸ B) Actual profit earned (if higher than above)
3	Specified Profession(e.g., Doctors, Lawyers, CAs, Engineers, Architects, etc.) [Sl. No. 3 & Section 62(4)]	Option A: Up to ₹50 lakhOption B: Up to ₹75 lakh (only if cash receipts ≤ 5%)	Specified assessee.	Choose HIGHER of: ▸ A) 50% of gross receipts ▸ B) Actual profit earned (if higher than above)

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So, when the Assessee opted to compute the profit & gains as per section 58, then the tax audit would not be triggered, provided that the declared profits are higher than the deemed profits. However, the twist arises due to Section 58(3): a person not opting for presumptive & declaring normal Business might get the applicability of Tax audit, as it says Any Assessee mentioned above who claims that: (a) The profits or gains actually earned from the specified business or profession are lower than the profits or gains computed in the manner mentioned AND (b) Total income exceeds Basic Exemption Limit Shall require:

1. Maintain books of Accounts us 62 AND
2. Get your Books Audited for us 63

Hence, under the new Income Tax Act 2025, i.e., from the tax year onwards, one should be very careful before choosing the normal business or presumptive business while considering the possibilities of Tax audit applicability.