Tax Audit

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Tax Audit

Section 44AB of the Income Tax Act 1961 requires that if the annual gross turnover or receipt of the company exceeds a specified limit, then it must get its accounts audited by a Chartered Accountant. The Chartered Accountant provides his findings and observations in his tax audit report in Form numbers 3CA/3CB and 3CD. The audit under section 44AB aims to ascertain the compliance of various provisions of the Income-tax Law and the fulfilment of other requirements of the Income-tax Law.

Turn over limit for Business & Profession

Tax Audit is applicable if the annual gross turnover/receipts in business exceed Rs. 1 Crore.
The tax audit limit for taxpayers who have opted for presumptive taxation under Section 44AD, is Rs. 2 Crore.
If cash transactions are up to 5% of total gross receipts and payments, the threshold limit of turnover for tax audit is increased to Rs.10 crores (w.e.f. FY 2020-21).
A tax audit is required if the annual gross receipts of a professional exceed Rs. 50 lakhs in a financial year, increased to Rs. 75 Lakhs from FY 2023-24.
Further, the audit is also required in cases where the taxpayer is declaring lower net profit while declaring profit U/s 44AD, 44ADA, 44AE.
If any business that does not opt for a presumptive taxation scheme and its sales and turnover exceed more than Rs. 1 Cr, it is applicable for tax audit. If the cash transactions are up to 5% of the total gross payments, then the threshold limit is increased up to Rs 10 Cr from FY 2021-22.

Tax Audit Due Date

The assessee is required to file an audit report by 30th September of the assessment year. For assesses liable for transfer pricing audits, the due date is 30th November of the relevant assessment year.

Tax Audit Penalty

As per Section 271B of the Income Tax Act 1961, the penalty for non-filing of the audit report is lower of:

0.5% of the total sales, turnover, or gross receipt.
Rs. 1,50,000