You should file your tax if you are a salaried person or undergo business under the Income Tax of India. A tax audit is mandatory if your gross revenue exceeds a specific limit. This option comes under section 44ab of the income tax act.
This audit ensures complete and precise information about your financial belongings. Your income, deductions, taxes, and account books comply with the Income Tax Act of 1961.
You should be aware of different provisions while getting your tax audit under section 44AB of the Income Tax Act, 1961. According to these provisions, a chartered accountant performs your tax audit.
Let us know more about section 44ab of the income tax act.
Who is liable for tax audit u/s 44AB?
You should perform a tax audit if your gross turnover exceeds a specific limit under section 44ab of the income tax act.
You are liable for an audit from a chartered accountant if you meet the below conditions-
- If you are running a business with gross turnover/receipts of ₹ 1 crore in any previous year
- If your gross income/receipts in your job were above ₹ 50 lakhs in any previous year
- If you come under the presumptive taxation scheme (44AD, 44ADA, and 44AE) of the Income Tax Department in your business or profession, but your profit is lower than the threshold limit
- Your sale turnover limit stands at two crores, and you are eligible for a tentative taxation scheme.
- If you have two or more businesses, the total profits from each enterprise comprise the gross turnover.
If you fall under these conditions, you are liable under section 44ab of the income tax act.
What are the forms you need to submit under section 44AB?
The Income Tax Department of India lists the below forms that you need to submit while filing your returns under section 44AB.
If you run a business,
- Form No. 3CA – where you have completed the audit of your accounts under any other law.
- Form No. 3CD – An auditor will fill this form with the reports collected from the evaluation.
If you are in a Profession,
- Form No. 3CB – You don’t require any audit under any law other than income tax law.
- Form No. 3CD – It consists of all details of your tax filing returns, devaluation, and other information compiled after evaluation.
These are the required forms, under section 44AB of the income tax act of India.
What is the turnover limit for 44AB for AY 2022 23?
Section 44ab requires you to audit your accounts if your annual turnover exceeds a specific limit. The turnover limit for your business profits is Rs.1 Crore. If the annual revenue of your business exceeds Rs.1 Crore, you are liable to claim under section 44ab.
In case you are in a job and your gross income exceeds Rs. 50 lakhs in any previous year, you are liable to file your tax under section 44ab.
Thus the turnover limit for section 44AB is Rs.1 Crore.
What is the difference between 44AB and 44AD?
Section 44AB insists you audit your accounts if your gross revenue exceeds Rs.1 Crore.
While section 44AD insists that you need not audit your account if your turnover exceeds 2 crores and the stated profit should exceed 8% in the previous year. You can claim a presumptive tax scheme under section 44AD. In such a case, you need not do an audit for your revenue.
What if a tax audit is not done?
You are liable for a tax audit if your gross revenue exceeds a specific limit. The audit helps the income tax department to calculate your gains and income ease.
If you are in a position to obtain a tax audit but do not get your accounts audited, you are liable for a penalty under Section 271B of the Income Tax Act. The penalty for not completing your tax audit is 0.5% of the turnover or gross receipts, subject to a maximum of Rs.1,50,000.
In cases of national misfortunes, death or resignation of the tax auditor, and situations beyond your control, the income tax department can revoke these penalties.
As you know about Section 44AB of the Income Tax Act, complete the essential processes before the due date to avoid heavy fines. It will also keep you in good books with the IT department.
How is the tax audit limit calculated?
The turnover limit for tax audit under section 44AB becomes Rs 10 crores instead of Rs 1 crore if the sum of cash receipts and expenses does not exceed 5% of the total receipts & payments during the financial year.
The main factor to calculate the Tax Audit limit under section 44AB is,
- If your total turnover exceeds Rs.1 crore in the FY, you have to perform an audit. However, if cash transactions are up to 5% of total gross payments, the threshold limit of turnover for a tax audit is raised to Rs.10 crore.
FAQS- 44AB of the income tax act
1. Is audit compulsory for loss return?
An audit is necessary under the following conditions in case of loss in your business.
- In case of loss from your business and not opting for presumptive taxation scheme and you claim a turnover or gross earnings of more than Rs 1 crore.
- Your total revenue is above the basic threshold limit, and you have incurred a loss from your business (not opting for a presumptive taxation scheme). In the case of loss from business when your turnover or gross earning is more than Rs.1 crore, you are subject to tax audit under 44AB.
2. Can I refuse a tax audit?
A tax audit is mandatory if your gross revenue exceeds a specific limit. If you fail to do an audit or refuse the same, you will have to face the consequences from the income tax department.
You are liable for a penalty of 0.5% of your gross receipts or a maximum of Rs.1.5 Lakhs.
You are also liable to pay additional taxes in the next financial year if you fail to perform an audit.
So, it is a bad idea to refuse a tax audit. Have your audit done within the due date and be in the good books of the income tax department.
3. What is the due date for filing an income tax audit report under section 44Ab?
After you obtain your audit report, you should file your income tax returns on or before the 30th of September of an assessment year to avoid any penalties.
Bottomline
Section 44AB of the income tax act states the rules and regulations of tax audits for individuals and businesses. It deals with the audit of your accounts. The audit is done to ensure they meet all requirements as specified under this section.
If your annual gross income/receipts exceed the specified limit, you should initiate a tax audit under IT section 44AB. A Chartered Accountant performs your tax audit.