The applicability of Tax Audit in India is governed by Section 44AB of the Income Tax Act, 1961. It lays down the threshold limits and conditions under which an audit of accounts is mandatory for businesses and professionals.
Applicability of Tax Audit
What is Tax Audit?
A tax audit is an examination and review of accounts of an entity to ensure compliance with the provisions of the Income Tax Act. It is conducted by a Chartered Accountant (CA).
Applicability under Section 44AB
1. For Business (Non-Professionals):
- If turnover/gross receipts exceed ₹1 crore in a financial year.
- However, the limit is increased to ₹10 crores if:
- Cash receipts do not exceed 5% of total receipts, and
- Cash payments do not exceed 5% of total payments.
So, if cash transactions are minimal, businesses can enjoy the ₹10 crore threshold.
2. For Professionals:
- Tax audit is applicable if gross receipts exceed ₹75 lakhs in a financial year.
3. Presumptive Taxation Scheme (Sections 44AD, 44ADA, 44AE):
4. Section 44AD – For Small Businesses:
- If a taxpayer opts out of presumptive taxation after opting in, and
- Total income exceeds the basic exemption limit, and
- Turnover is below ₹2 crores, tax audit is mandatory for the next 5 years.
5. Section 44ADA – For Professionals:
- If the professional claims income lower than 50% of gross receipts, and income exceeds the basic exemption limit then tax audit is mandatory.
6. Section 44AE – For Transporters:
- If the taxpayer declares less income than the deemed profits (as per 44AE), and income exceeds the basic exemption limit then Tax audit is applicable.
Who Can Conduct a Tax Audit?
- Only a Chartered Accountant (CA) in full-time practice.
Due Date for Tax Audit Report (Form 3CA/3CB + 3CD):
- 30th September of the Assessment Year (for most taxpayers),
- 31st October if subject to TP provisions (Transfer Pricing).
Key Forms:
- Form 3CA: For entities already required to get accounts audited under any other law.
- Form 3CB: For entities not required to get accounts audited under any other law.
- Form 3CD: The detailed statement of particulars (annexed to 3CA/3CB).
If you want help determining whether your specific case is liable for tax audit, feel free to share your turnover, cash transactions, nature of income, etc.
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