Section 44AB of Income Tax Act 1961 contains the provisions of Tax Audit. This section contains the provisions to maintain books of accounts and other financial documents.
What is Tax Audit
A Tax audit is the examination of the books of accounts that are prepared by the taxpayer. In the tax audit, the auditor will check and review all the transactions which are related to the income, expenditures of the organization. As per the provision of Income Tax, the tax audit is done by the Chartered Accountant and during the audit, the Chartered Accountant will verify the accounts of entity, income tax deductions, and compliance with the various provisions and after that will issue a tax audit report.
Objectives of Tax Audit
There are the following objectives of Tax Audit-
- Ensure the maintain of proper and corrective books of accounts by the taxpayer
- The books of accounts are truly reflecting the income and the expenses of the taxpayer.
- To ascertain and report the requirement of Form 3CA/3CB and 3CD.
- Reporting the observations which are noted by the auditor during the audit.
- Reporting various other relevant information such as depreciation, compliance with the provision for income tax law, etc.
- To check the tax computation and the deductions which are eligible for the assessee.
Applicability of Section 44AB
- Any person who is engaged in the business and whose amount of turnover is more than 1crore in the financial year (The limit of 1crore for the tax audit is increased to 5crore with effect from AY 2020-21, if the taxpayer’s cash receipts are restricted to 5% of gross receipts or turnover and the cash payments are restricted to 5% of total payments).
- Any person who is engaged in the profession and whose amount of gross receipts is more than 50lakh in the financial year.
- Any person who is declaring the amount of income as per section 44AD, and amount of turnover is more than 2crore.
- Any person who is declaring the amount of income as per section 44ADA, 44AE, 44BB, and section 44BBB but claiming lower income than the profit that is calculated as per these sections in the previous year.
Due date for tax audit
The due date of the tax audit is 30th September of the particular financial year i.e. the audit must be completed on or before 30th
Penalty for non-filing of tax audit report
If there is any person who is required to comply with the provision of section 44AB and if fails to comply with the provision of section 44AB, the assessing officer may impose the amount of penalty. The amount of penalty will be-
- .5% of total sales, turnover, or gross receipts.
Whichever is lower.
Forms to be filled for Income Tax Audit under section 44AB
Forms which are required to be filed with tax audit report under section 44AB- There are following forms which are required to be filed as per section 44AB-
- Form 3CA- Form 3CA is required to be filed by the person who is engaged in business or profession and whose books of accounts are required to be audited under any other law.
- Form 3CB- Form 3CB is required to be filed by the person who is engaged in business or profession and whose books of accounts are not required to be audited under any other law.
- Form 3CD- In all cases, the taxpayer will furnish Form 3CD along with form 3CA or form 3CB.