Income Tax Audit under Section 44AB

Income Tax audit under section 44AB defines tax provisions of the tax audit for a business entity. According to the tax provisions laid down under section 44AB, every eligible individual or business needs to get their accounts audited by a chartered accountant to ensure that whether they are maintaining their books of accounts properly & compliant with the tax provisions or not.

Tax audit is basically an independent verification done by a chartered accountant after examining the tax records of an individual or business for which the report is submitted later to the income tax department through Form no. 3CA/3CB/3CD & 3CE along with the income tax return. It makes income tax computation process for return filing easier.

Tax Audit under Section 44AB

Objectives of the Tax Audit

Tax audit is conducted in order to achieve the following objectives –

  • It ensures proper verification, correction, maintenance and certification of the books of accounts by the tax auditor.
  • Reporting of errors/discrepancies by the auditor after examination & verification of books of accounts.
  • It helps the taxpayer in calculating & verifying the total income and claiming deductions as well.
  • Reporting of prescribed information such as tax depreciation, compliance of various provisions of income tax law etc.
  • It helps in checking fraudulent practices.

Who can conduct tax audit under Section 44AB?

A Chartered accountant holding the practicing certificate and a full time chartered accountant can conduct tax audit under section 44AB.

Who is mandatorily subject to tax audit?

The following persons are mandatorily subject to tax audit –

  • Carrying on Business (Not availing presumptive taxation scheme) – A person carrying on business having total sales, turnover or gross receipts exceeding Rs.1 crore in the relevant financial year mandatorily subject to tax audit.
  • Carrying on business (Availing presumptive taxation scheme) – A person carrying on business having total sales, turnover or gross receipts exceeding Rs.2 crore in the relevant financial year mandatorily subject to tax audit.
  • Carrying on business (Availing presumptive taxation scheme under section 44AE, 44BB or 44BBB) – A Person having profit or gain lower than the limit prescribed under section 44AE, 44BB or 44BBB mandatorily subject to tax audit.
  • Carrying on profession – A person carrying on profession having total gross receipts of more than Rs.50 lakh in a relevant financial year mandatorily subject to tax audit.
  • Carrying on profession (Availing presumptive taxation scheme under section 44ADA)
    1. Person carrying profit or gain lower than the limit prescribed under section 44ADA.
    2. Person whose income is more than the maximum amount not chargeable to income tax.

Forms required to be submitted under Income Tax Section 44AB

The audit report conducted by a chartered accountant has to be furnished in either of the following forms –

Form 3CA

When the taxpayer carrying on a business or profession need to get his accounts audited under any other law other than income tax law, Form no. 3CA is furnished by the taxpayer. It is furnished by the chartered accountant after the Audit completion.

Form 3CB

When a taxpayer carrying on a business or professional is not needed to get his accounts audited under any other law other than income tax law, Form 3CB is furnished by the taxpayer.

Form 3 CD

Form no. 3CD is a detailed statement of particulars having 41 points comprising of various business and transaction aspects required to be furnished at appropriate places.

Form 3 CE

Non-residents & foreign companies who are receiving fees or royalty from the Indian government or concerns for the technical services needs to get their accounts audited by the chartered accountant. Report made by the auditor is furnished in Form 3CE along with the annexure.

How tax report shall be furnished?

  1. Tax audit report is furnished by the tax auditor by logging into his account online. Taxpayer can also add details of his CA in the login portal.
  2. Once the report is uploaded by the tax auditor, it either gets accepted or rejected by the taxpayer. In case it is rejected due to any reason, all the process will be followed again till the same is accepted by the taxpayer.

When tax report shall be furnished?

Tax report should be filed on or before the deadline to avoid fines & penalties. 30th November of the subsequent year is the due date for those taxpayers who are involved in international transaction whereas 30th September of the subsequent year is the due date for all other taxpayers.

Penalty for Non-filing or delay in filing of tax audit report

It is mandatory for a taxpayer to file tax audit report before the deadline to avoid fines & penalties. In case taxpayer unable to file the tax audit report before the deadline, the following penalties are levied –

  1. 0.5% of the total sales, turnover or gross receipts
  2. Or

  3. Rs.150000 (Whichever is less)

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