Tax Audit under section 44AB of Income Tax Act,1961
Meaning of Tax Audit :-
An audit means the verification of books of accounts by an independent auditor and expressing an opinion on the financial statements drawn with respect to those books of accounts. Several statutes provide for the audit of books of accounts. For eg. Statutory audit as per Companies Act,2013. Similarly, Income Tax Act,1961 requires certain category of Taxpayers to get their books of accounts audited. This post shall throw some light on audit u/s 44AB of the income Tax Act,1961
Applicability of Section 44AB :-
As per the provisions of the Act, the following persons need to get their books of accounts audited by a Chartered Accountant who holds a valid Certificate of Practice:-
- Every Taxpayer carrying on a business whose Gross turnover, sales, gross receipts exceeds Rs. 1 crore in the relevant Financial year.
- Note:- This threshold limit of Rs. 1 crore is increased to Rs. 5 crores from AY 2020-21 if the taxpayer’s aggregate cash receipts don’t exceed 5% of total cash receipts and aggregate cash payments don’t exceed 5 % of total cash payments.
- A Taxpayer carrying on a profession and the Gross receipts exceeds Rs. 50 lakhs in the relevant Financial Year.
- Any Taxpayer eligible for computation of profits as per Presumptive Taxation but claims the profit to be lower than computed under the Presumptive Taxation Scheme . This provision is applicable to those taxpayers who opt out of presumptive taxation u/s 44AD or u/s 44ADA as the case may and their turnover is limited to Rs. 2 Crores in case of Business and Rs. 50 Lakhs in case of Profession.
Example:- a) An Individual having Turnover Rs. 1.50 crores is eligible for Presumptive Taxation and need not get the books audited. However if he claims the profit to be lower than that calculated or under presumptive taxation scheme or he shows a loss, He requires to get his books of accounts audited
- b) A Taxpayer having turnover Rs. 2.5 Crores is not eligible for presumptive taxation scheme, but he need not get his books of accounts audited if he fulfills the condition of cash payments not exceeding 5% of total cash payments and cash receipts not exceeding 5% of total cash receipts during the relevant financial year even if there is a loss or low Profits. However if either the cash receipts or cash payments exceed the prescribed threshold, he is required to get his books of accounts audited.
Due Date of Tax Audit:- The Tax Audit report in prescribed form must be submitted before the 30th September of the subsequent Financial year. The said date has been extended to 31st October,2020 for Financial Year 2019-20 (AY 2020-21).
Penalty for non-filing or delayed filing of audit report:- If a taxpayer who is required to get the audit done fails to do so or files the audit report after the due date, The least of the following may be levied as penalty:-
- i) 0.5% of Turnover, sales or Gross Receipts
- II) Rs. 1,50,000.
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