Tax Audit Under Section 44AB of Income Tax Act, 1961

  • August 8, 2019
  • CA Chandan Agarwal's Office
CA Chandan Agarwal
CA Chandan Agarwal

A Tax Audit is an audit, made compulsory by the Income Tax Act, if the annual gross turnover/receipts of the assessee exceed the specified limit. Tax audit is conducted in Sec 44AB of the Income Tax Act by a Chartered Accountant. Simply Tax Audit means, an audit of matters related to tax.

Applicability of tax audit

Category of Persons Threshold Limit
Business Sales/Turnover or Gross Receipt Exceeds Rs. 1 Crore
Profession Gross Receipts Exceeds Rs. 50 Lakhs
Business u/s 44AD Sales/Turnover or Gross Receipt Exceeds Rs. 2 Crore. Also any person enrolled under the presumptive taxation scheme who claims that the profits of the business are lower than the profits calculated in accordance with the presumptive taxation scheme would be required to obtain a tax audit report.
Profession u/s 44ADA Declaring his income at amount less than 50% of his gross receipts and whose income exceeds the basic exemption limit for relevant previous year.
  • If the assesse who is qualified under the presumptive taxation scheme but opts out of it after a specified period, he would lose the ability to revert back to the presumptive taxation scheme for a continuous term of 5 assessment years after the decision to opt out is taken.

Due Dates of Filing Tax Audit Report

30th September is the due date to filing tax audit report under section 44AB for all the assessee. Hence, if a a tax audit is applicable to any assessee, then he/she has to mandatorily file its income tax return along with the tax audit report before 30thSeptember.

Where the assessee is required to furnish a report of a chartered accountant as referred to in section 9E relating to international transaction or specified domestic transaction then the due date to submit audit report is 30th November.

Penalty for Completing Tax Audit

If a taxpayer who is required to obtain tax audit does not get the accounts audited, then penalty could be levied under Section 271B of the Income Tax Act.

  • 5% of the turnover in case of business organisation or 0.5% of the total receipts in case of profession of the current financial year.

OR

  • Rs. 1,50,000.

whichever is lower.

However, according to the section 273B, no penalty would be imposed on the person if valid reason for such failure is proved.

Thus, tax audit is a very important requirement for individuals who are required to undergo such an audit. Failure to comply with the income tax rules would attract penalty and individuals wishing to avoid any penalty should ensure full compliance with all the rules of the income tax audit.

Who can Audit Your Account Books?

In India, Chartered Accountant will audit the account and prepare the report as prescribed in Income Tax Act. They are qualified for accounts and having degree of Chartered Accountancy (CA) from ICAI. Assessee can also authorize Chartered Accountant to file their income tax return on his behalf or file by himself. It is not mandatory to file income tax return by CA; Only audit report is mandatory. The audit report must be submitted before the due dates.

Form 3CA/3CB & 3CD

Any person who is required to get tax audit would be required to furnish the following for tax audit while filing income tax return:

Form 3CA, 3CD – Audit Report Form in case where accounts of an assessee has been audited under any other law.

Form 3CB, 3CD– Audit Form in case accounts of an assessee are not being subject to audit under any other act except Income tax Act.

Source: https://taxguru.in/income-tax/tax-audit-section-44ab-income-tax-act-1961.html

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