Tax Audit under section 44AB

Posted by Ca On Web on March 30th, 2018

Among some audit compliance in India, Tax Audit under section 44AB is one of them. Section 44AB gives the provisions relating to the class of taxpayers who are required to get their accounts audited .  The audit under section 44AB aims to ascertain the compliance of various provisions of the Income-tax Law.For Tax Audit under section 44AB audit service provider in India is Chartered Accountant. The report of tax audit is to be given by the chartered accountant in Form 3CA/3CB and 3CD. ​

What is the main objective of tax audit? It  ensures that the books of account and other records are properly maintained, tax deductions are made correctly, any tax liabilities are complied with. Such audit aims at checking fraudulent practices. It can also facilitate the administration of tax laws by a proper presentation of accounts before the tax authorities and considerably save the time of Assessing Officers in carrying out routine verification’s.

As per section 44AB, For audit compliance in India, in Tax Audit context , following persons are compulsorily required to get their accounts audited:

 ·         A person carrying on business, if his total sales, turnover or gross receipts (as the case may be) in business for that year exceed or exceeds Rs. 1 crore. This provision is not applicable to the person, who opts for presumptive taxation scheme under section 44AD​ and his total sales or turnover does not exceeds Rs. 2 crores.

 ·         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 but claims the profits or gains for such business to be lower than the profits and gains computed as per the presumptive taxation scheme under section 44AD and his income exceeds the amount which is not chargeable to tax.

 ·         If an eligible assessee opts out of the presumptive taxation scheme, after specified period, he cannot choose to revert back to the presumptive taxation scheme for a period of five assessment years thereafter.

What are the consequences of non compliance with tax audit laws?

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 provided.

Summary: Reach out to audit service provider in India and comply with the tax audit prescribed by Income tax Law.