Tax Audit under section 44AB
The Income-tax Law requires the taxpayer to get the audit of the accounts of his business/profession under provisions of section 44AB. Objective of tax audit is to ensure that the books of accounts and other records are properly maintained. The dictionary meaning of the term "audit" is check, review, inspection, etc. There are various types of audits prescribed under different laws like company law requires a company audit, cost accounting law requires a cost audit, etc. The Income-tax Law requires the taxpayer to get the audit of the accounts of his business/profession from the view point of Income-tax Law.
Section 44AB gives the provisions relating to the class of taxpayers who are required to get their accounts audited from a chartered accountant. The audit under section 44AB aims to ascertain the compliance of various provisions of the Income-tax Law and the fulfillment of other requirements of the Income-tax Law. The audit conducted by the chartered accountant of the accounts of the taxpayer in pursuance of the requirement of section 44AB is called tax audit.
The chartered accountant conducting the tax audit is required to give his findings, observation, etc., in the form of audit report. The report of tax audit is to be given by the chartered accountant in Form Nos. 3CA/3CB and 3CD.
Persons compulsorily required to get his account audited:-Tax Audit is conducted under provisions of section 44AB. As per this section following persons are required to get their accounts audited:-
· A person carrying on business, if his total sales, turnover or gross receipts (as the case may be) in business for the year exceed or exceeds Rs. 1 crore.
· A person carrying on profession, if his gross receipts in profession for the year exceed Rs. 50 lakhs.
· A person who has opted for computing profits and gains of business on presumptive basis under section 44AD earlier and the assessee has opted out of such presumptive income in succeeding 5 years and his income exceeds the ceiling for chargeability of income tax, is also required to get tax audit done.
· A person has opted for presumptive scheme under section 44AD/ADA and he claims his income lower than the deemed profits and his income exceeds the ceiling for chargeability of income tax, is also required to get tax audit done.
· A person who is eligible to opt for the presumptive taxation scheme of sections 44AE,44BB,44BBB but he claims the profits or gains for such business to be lower than the profits and gains computed as per the presumptive taxation scheme of these section, is also required to his accounts audited.
However tax audit is not applied on a person who:-
(i) opts for presumptive taxation scheme under section 44AD and his total sales or turnover doesn’t exceeds Rs. 2 crores.
Persons like company or co-operative society are required to get their accounts audited under their respective law. Section 44AB provides that, if a person is required by or under any other law to get his accounts audited, then he need not again get his accounts audited to comply with the requirement of section 44AB. Is such a case, it shall be sufficient if such person gets the accounts of such business or profession audited under such law and obtains the report of the audit as required under such other law and also a report by the chartered accountant in the form prescribed under section 44AB, i.e., Form No. 3CA and Form 3CD
Who can conduct Tax Audit?
Tax audit can be conducted by a person who is member of ICAI i.e. A Chartered Accountant, holding “Certificate of Practice”.
The report of the tax audit conducted by the chartered accountant is to be furnished in the prescribed form. The form prescribed for audit report in respect of audit conducted under section 44AB is Form No. 3CB and the prescribed particulars are to be reported in Form No. 3CD.
In case of persons who are required to get their accounts audited by or under any other law, the form prescribed for audit report is Form No. 3CA/3CB and the prescribed particulars are to be reported in Form No. 3CD.
Due date for filing of Tax Audit:-A taxpayer covered under this section should get his account audited by 30th of September of relevant assessment year. Tax audit report should be filed by Chartered accountant, electronically to the income tax department thereafter tax payer has to approve this report.
Penalty for non-compliance of Tax Audit provisions:-If a taxpayer who is required to comply with provisions of section 44AB fails to get his accounts audited or furnish audit report, assessing officer may impose penalty under section 271B, which shall be lower of:-
(i) 0.5% of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such year or years.
(ii) Rs. 1,50,000.
Read here:
FAQs on Tax on Presumptive Taxation Scheme 44AD/44ADA/44AE
FAQs on TDS (Tax Deducted at Source)
FAQs on filing of Income Tax Return (ITR)
FAQs on Income and Computation of Income
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