Income Tax Audit – Ensuring Compliance & Accuracy
An Income Tax Audit ensures that taxpayers maintain accurate books of accounts and financial records, truly reflecting their income. Section 44AB of the Income Tax Act, 1961, mandates tax audits for businesses and professionals exceeding specified turnover or income thresholds.
Applicability of Income Tax Audit (Section 44AB)
For Businesses:
Not Opting for the Presumptive Taxation Scheme (44AD):
- If total sales, turnover, or gross receipts exceed ₹1 crore in a financial year.
- If cash transactions (receipts and payments) are up to 5% of total gross receipts, the tax audit threshold increases to ₹10 crore.
Opting for the Presumptive Taxation Scheme (44AD):
- If total sales, turnover, or gross receipts exceed ₹2 crore in a financial year.
- If cash receipts do not exceed 5% of total turnover, the tax audit threshold increases to ₹3 crore.
- If the business claims profit lower than 8% of turnover (or 6% for digital transactions).
For Professionals:
Compulsory Audit If:
- Gross receipts exceed ₹50 lakh in a financial year.
- Profit is lower than 50% of total receipts and exceeds the basic exemption limit.
- Income Tax Audit Compliance & Penalties.
Audit Report & Filing:
- The audit report must be filed using Form 3CA/3CB and 3CD by 30th September of the assessment year.
Penalty for Non-Compliance (Section 271B):
- The lower of 0.5% of total sales, turnover, or gross receipts ₹1,50,000.