When The Tax Audit (Under Section 44AB) Is Compulsory?

Tax audit is compulsory in the following cases:-

  • If the gross turnover or receipts of a business firm exceeds Rupees One Crore.
  • If the gross turnover or receipts of a professional firm exceeds Rupees Fifty Lakhs.
  • Truck operators and person engaged in specified businesses declaring their income at an amount less than the amount computed under section 44AE, 44BBB as the case may be, shall get their accounts audited u/s 44AB.
  • Any assessee who is carrying a business covered under section 44AD with turnover up to Rupees One Crore, and who declares his income less than 8% of his turnover and whose income exceeds basic exemption limit for relevant financial year, is also liable to get his accounts audited under section 44AB. With effect from financial year 2017-18, assessee engaged in a business and declaring income under presumptive tax scheme u/s 44AD whose total sales, turnover or gross receipts, does not exceed Rs. 2 crore, are not liable to get their accounts audited.
  • A professional assessee covered covered under section 44ADA, declaring his income at an amount less than 50% of his gross receipts and whose income exceeds the basic exemption limit for the relevant previous year.
  • Audit of accounts is also compulsory for claiming deduction under section 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID, 80-IE, 80-JJAA OR 80-LA.

Note: Non-residents deriving income from shipping business/operation of aircraft, covered under section 44B or 44BBA, are not required to get their accounts audited under section 44AB.

Who Does the Tax Audit?

The Audit shall be done by a practicing Chartered Accountant and the audit report along with a statement of particulars, should be furnished in the following prescribed forms:-

Category                                                                                            Form for            Form for

Audit Report   Statements

of Particulars

Where accounts have been audited under any other law                   3CA                   3CD

Where Accounts have been audited under Income Tax Act                3CB                   3CD

LAST DATE OF TAX AUDIT REPORTS

The Tax Audit must be done before due date of filing of income tax return and the return should be filed in based on such report.. Presently the last date of submitting the income tax return is 30th September. Therefore, the audit report must be prepared up to 30the September.

PENALTY FOR FAILURE TO GE THE ACCOUNT AUDITED

A penalty will be imposed on gross turnover or gross receipts up to ½ percent of gross turnover/receipts or Rupees One Lakh Fifty Thousand whichever is less if the accounts are not audited or the audit report is not furnished in time i.e. presently up to 30th of September.

For example the gross turnover of M/s XYZ Enterprises is Rs. 4 crore and tax audit is not finished in time then the penalty on Rs. 4 crore ½ percent will be Rs. 2 lakh or Rs.1,50,000/= whichever is less. In this case, M/s XYZ enterprises have to a penalty of Rs.1,50,000/=.

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