Tax Audit under Section 44AB of Income Tax Act

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Sakshi Shah

Section 44AB
Tax Audit

Tax Audit under Section 44AB of the Income Tax Act is the examination and review of the books of accounts of a taxpayer having income from business or profession. The taxpayer should appoint a practicing CA i.e. Chartered Accountant to audit the books of accounts. The tax auditor would ensure that books of accounts have been maintained correctly, report observations, and required information in the tax audit report. The applicability of tax audit depends upon the turnover/sales/gross receipts of the business or profession.

Tax Audit Report
Learn more about the tax audit report along with the important forms such as 3CA, 3CB and 3CD
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Tax Audit Report
Learn more about the tax audit report along with the important forms such as 3CA, 3CB and 3CD
Read More

Tax Audit under Section 44AB for Business

Turnover / Sales up to INR 1 Cr

Check which ITR Form to file?
Income Tax Return Forms to file depends on your Income Source, Residential Status, and other financial situation. Know which ITR Form you should file.
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Check which ITR Form to file?
Income Tax Return Forms to file depends on your Income Source, Residential Status, and other financial situation. Know which ITR Form you should file.
Explore

Turnover / Sales more than INR 1 Cr and up to INR 2 Cr

Import Your Trades
File ITR Online

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Import Your Trades

File ITR Online

India’s fastest growing Tax Filing Platform

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Turnover / Sales more than INR 2 Cr

Note: The prescribed rate is 8% for non-digital transactions and 6% for digital transactions.

Tax Audit under Section 44AB of Income Tax Act
Tax Audit Due Date
Refer to this article to know all the important due dates related to tax audit
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Tax Audit Due Date
Refer to this article to know all the important due dates related to tax audit
Read More

Tax Audit limit change FY 2020-21 onwards

The limit for turnover under Section 44AB is INR 1 Cr. Under Budget 2020, the turnover limit under Sec 44AB has been increased from INR 1 Cr to 5 Cr if the following conditions are satisfied:

  1. Cash Payments do not exceed 5% of the Total Payments in the financial year AND
  2. Cash Receipts do not exceed 5% of the Total Receipts in the financial year

Note: For the taxpayers who do not satisfy the above conditions, limit under Sec 44AB of Rs. 1 Cr remains unchanged.

Tax Audit of Trading Income
Turnover limit for Tax Audit is increased from Rs. 1 Cr to Rs. 5 Cr in Budget 2020. Read about tax audit applicability for trading income.
Read More
Tax Audit of Trading Income
Turnover limit for Tax Audit is increased from Rs. 1 Cr to Rs. 5 Cr in Budget 2020. Read about tax audit applicability for trading income.
Read More

Tax Audit Applicability u/s 44AB for Profession

Turnover / Sales up to INR 50 lacs

Turnover / Sales more than INR 50 lacs

Check Tax Audit Applicability u/s 44AB
Check Income Tax Audit applicability u/s 44AB to file Tax Audit Report Form 3CB - 3CD with your Income Tax Return.
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Check Tax Audit Applicability u/s 44AB
Check Income Tax Audit applicability u/s 44AB to file Tax Audit Report Form 3CB - 3CD with your Income Tax Return.
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Tax Audit under Section 44AB(c) of Income Tax Act

If a business eligible for Presumptive Taxation under Sec 44AE, 44BB, or 44BBB but reports profits or gains lower than the prescribed rate under the relevant section, they are liable to Tax Audit under Section 44AB(c).

FAQs

If a business is liable to get accounts audited under any other law, is Tax Audit under Income Tax Act also required?

Assessee such as Company is liable to Statutory Audit under Companies Act 2013. As per Section 44AB, if an assessee is required to get audit under any other law, he/she need not get the accounts audited again to comply with Section 44AB. In such a case, the assessee should submit the report as per audit under the other law and also a Tax Audit Report (Form 3CB-3CD) by a Chartered Accountant as prescribed by Section 44AB.

What is the Due Date for Tax Audit as per Section 44AB?

Assessee liable to tax audit as per section 44AB of the Income Tax Act should get the books of accounts audited on or before 30th September of the next financial year. In case of the applicability of tax audit for AY 2019-20, the due date to file the audit report was 30th September 2019.

FY 2020-21 onwards, the due date to file the Tax Audit Report has been amended to 31st October of the next financial year. The assessee should appoint a practicing CA. Once the CA electronically files the tax audit report, the assessee must approve the tax audit report from the account on incometaxindiaefiling.gov.in.

What is the penalty if I do not get books of accounts audited as per Section 44AB?

If the assessee does not get accounts audited as per requirements of Section 44AB, the Assessing Officer may impose a penalty under Section 271B. The penalty is lower of the following:
(a) 0.5% of Sales / Turnover / Gross Receipts OR
(b) INR 1,50,000
However, if the assessee can provide a valid justification and prove a reasonable cause for not getting a tax audit, the Assessing Officer may not impose any penalty.

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