Income Tax Audit under section 44AB (Mandatory)

1. The following person need to get a tax audit done

• Person carrying on business- If turnover/ gross receipts from business exceed Rs 1 crore or if cash transactions are up to 5% of total gross receipts and payments, the threshold limit of turnover for a tax audit is increased to Rs. 10 crores
• Persons carrying on profession- If turnover/gross receipts from profession exceeds INR 50 lacs.
• Persons covered under presumptive taxation schemes under section 44AD, 44ADA,44AE etc needs to get tax audit done if their income exceeds the maximum amount not chargeable to tax.
• The business is required to get tax audit done if there is no profit or a loss in the financial year if the turnover or gross receipts exceeds the specified limits (Rs 1 crore for business and Rs 50 lacs for profession)

2. Documents audited under section 44AB

The CA audits the books of accounts like the cash book, ledger, journals, bank statements, stock records, and sales/purchase invoices. Other documents like audit reports, balance sheets, profit/loss accounts, and notes to accounts are also audited.

3. Forms 3CA-3CD

Form 3CA is the tax audit report filed by the Chartered Accountant. It certifies that the audit was conducted as per the provisions of Section 44AB.

Form 3CDis the statement of particulars in a prescribed format that needs to be submitted along with Return and Form 3CA. It provides details of deductions claimed, compliance, etc.

4. Due dates for tax audit

The tax audit report under Section 44AB needs to be submitted electronically by the due date for filling income tax return , which is 31st October for individuals and firms not subject to tax audit. For corporations and persons needing tax audits, it is September 30th.

5. A tax audit report can be revised if there are genuine errors or omissions. The revision must be done before the due date for filing the Income Tax Return or when the original report was submitted, whichever is earlier.

6. Relationship between Section 44AB and Section 44AD- Section 44AD is a presumptive taxation scheme for small businesses. If a taxpayer opts for Section 44AD but reports income lower than the presumptive rates (8% for non-digital and 6% for digital transactions) and their total income exceeds the basic exemption limit, they are required to get a tax audit under Section 44AB.

7. Consequence for not getting tax audit done

Penal consequence under section 271B. The assessing officer can levy a penalty Rs 1 lakh or 0.5% of turnover, which is lower. Prosecution can also be initiated.

8. Penalties for submitting a delayed tax audit report

If the tax audit report is submitted after the due date, penalties under Section 271B apply. The penalty is either Rs 1.5 lakh or 0.5% of total turnover or gross receipts, whichever is lower.