Tax Audit

We Balakrishna and Co., well known mid sized audit firm and tax consultant in Bangalore, India has been providing audit services in this regard over the last 28 years and has rich experience and expertise in the field. As a proactive income tax auditors and tax consulting firm, apart from issuing tax audit report required u/s 44AB of income tax act 1961, we advise our client for their long term gain and do not advise anything just for short term gain of clients

The Income Tax Act, 1961 requires the books of accounts of persons carrying on business or profession to be audited in accordance with the provisions of the act in this regard, where the turnover or gross receipts exceed the limit specified therein. Such an audit is mandatory in nature and is to be conducted by a Chartered Accountant.

What is Tax Audit:

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 Tax audit report. The report of tax audit is to be given by the chartered accountant in Form Nos. 3CA/3CB and 3CD.

Who is covered under Tax Audit? Who is compulsorily required to get his account audited?

As per section 44AB, following persons are compulsorily required to get their accounts audited :
A person carrying on business, if his total sales, turnover or gross receipts in business for the year 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 is eligible to opt for the presumptive taxation scheme of section 44AD (turnover less than 2.00 crore) but claims the profits or gains for such business to be lower than the profits and gains computed (less than 8% of turnover) as per the presumptive taxation scheme of section 44AD and his income exceeds the amount which is not chargeable to tax.

What is the penalty for not getting the accounts audited as required by section 44AB of income tax act?

According to section 271B, if any person who is required to comply with section 44AB fails to get his accounts audited in respect of any year or years as required under section 44AB, the Assessing Officer may impose a penalty.

The penalty shall be lower of the following amounts:

(a) 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

(b) Rs. 1,50,000.

However, according to section 273B​, no penalty shall be imposed if reasonable cause for such failure is proved.

What is the due date to get his account audited?

The person covered under tax audit u/s 44AB should get his account audited and should obtain tax audit report on or before 30th Sept every year.