Income Tax Audit under section 44AB

Section 44AB required certain persons to get there accounts audited under IT act by a charted accountant in practice if the conditions as specified in section 44AB fulfills.

Followings persons are required to carry on Income Tax Audit as specified under Section 44AB;

A person carrying on business

Under section 44AB, income tax audit will be compulsory for a person carrying on business if the total sales, turnover or gross receipt in business for the previous year (financial year) relevant to the assessment year exceed or exceeds Rs 1 crore.

This limit of Rs 1 Crore is applicable from assessment year 2013-2014 onwards. For assessment year 2011-2012 and 2012-2013 the limit to get tax audit done was Rs 60 lakhs. Up to assessment year 2010-2011 and prior to that this limit was only Rs 40 lakhs. Income Tax Audit under section 44AB

A person carrying of Profession

Income tax audit is also required to be done for a person who is rendering professional services if his gross receipts from profession for the previous year (financial year) relevant to the assessment year exceed Rs. 25 lakhs for the assessment year 2013-2014 and onwards.

This limit has been increased from assessment year 2013-2014. otherwise it was Rs. 15lakhs for the assessment year 2011-2012 and 2012-2013. For assessment year 2010-2011 and prior to that the limit was only Rs. 10 lakhs.

Person covered u/s 44AD, 44AF, 44AE, 44BB or 44BBB

Any one covered under section 44AD, 44AE, 44AF, 44BB or 44BBB and claims that the profits and gains from such business are lower than the profits and gains computed under these sections then Income Tax audit under section 44AB is required to be done.

Specific forms required for Tax audit under section 44AB – Rule 6G

Certain specified forms are prescribed in rule 6G under IT act for income tax audit under section 44AB.

If a person is carrying business or profession and their books of accounts are required to be audited under any law (like audit under companies act) then following forms are to be used;

  • Form No 3CA – Audit Form
  • Form No 3CD – Statement of Particulars

Any other persons whose books of accounts are not required to be audited under any other law (other than tax) should use following prescribed forms for IT audit under section 44AB;

  • From No 3CB – Audit Form
  • Form No 3CD – Statement of Particulars

Due date under section 44AB

If the accounts are required to undergo income tax audit under section 44AB then the due date of filling IT return is 30th September of the assessment year relevant to the previous year.

This means for the assessment year 2015-2016, due date of filing tax audit report under section 44AB along with Income tax return is 30th September 2015. Similarly for assessment year 2016-2017 the due date would be 30th September 2016.

Efilling

From assessment year 2013-2014 onwards efilling of your income tax audit report is mandatory (please refer notification no 34 dated 1st may 2013). The person has to efile the audit report along with the IT return by putting all the required details.

Read: How to file Tax audit report online

FAQs on Income tax audit under section 44AB

Income Tax Audit under section 44ABI have two businesses. where in the 1st business I am getting 40Lakhs per year and from the 2nd business 70 lakhs per year. Both are different types of businesses. Will I be eligible for income tax audit under section 44AB?

Yes, you will be eligible for Tax audit as both the businesses are in your name. Section 44AB of IT act specifies the turnover, gross receipt or sales per person not per business. So you have to do tax audit under section 44AB and also you need to ensure that the tax filling is done before the due date as mentioned above.

What are the items not to be considered for calculating turnover, gross receipt and sales for the purpose of income tax audit under section 44AB?

As per section 44AB of IT act following items are not be considered for the purpose of calculating turnover, sales and gross receipt;

  • Sale proceeds of fixed asset
  • Rental income
  • Interest (not incurred from business)
  • Sale proceeds from an asset which was originally held for investment

What will happen if I will not be carrying Income tax audit under section 44AB?

If you are eligible for income tax audit under section 44AB then you must carry on such audit. Failure to that, you will be liable for penalty of ½ % of the turnover or sales or gross receipts subject to a maximum amount of Rs. 1, 50,000.

However if you can prove that failure of income tax audit is due to a reasonable cause then no such penalty under section 271B will be charged on you. Following reasons can be considered as a reasonable cause;

  • Resignation of the tax auditor and the delay has been caused because of that
  • Any person is charge of the accounts or responsible for such audit has died
  • Problems due to which the person is not able to access the books of accounts (strike, lock-out, fire, thefts etc).
  • Natural calamity

Can I revise my tax audit report which has already been filled under section 44AB?

No, you cannot do it in normal circumstances. But if there is a change in accounts due to non adoption in annual general meeting or due to retrospective amendment in law then such audit report can be revised and the auditor has to specify that it is a revised audit report. The reason of such revision should also be specified.

I approached a charted accountant and he said he cannot do my audit because of the ceiling limit on him. What is this ceiling limit under section 44AB?

Income tax audit ceiling limits are fixed by ICAI. A chartered accountant in practice cannot take more than 60 income tax audit assignment in a financial year. But if a firm has more than one partner then this limit of 60 will be multiplied with the number of partners. If a firm has 10 partners then they can take 600 such assignments. If a firm has only one partner then only 60 audit assignments can be taken.

Earlier limit of 45 per chartered accountant has been increased to 60 by ICAI. The said limit will be effective for the audits conducted during the financial year 2014-15 and onwards. Here is ICAI official announcement.

4 thoughts on “Income Tax Audit under section 44AB

  1. Indira

    I am individual , my income is from professional software consulting . I do not own any registered business and i do my work through freelance sites like Elance etc .

    I pay a couple of persons who are working for me . My annual income would be close to 5 to 7 lakhs .

    I pay the persons who are working with me , which would be around 4 lakhs .

    Should i deduct TDS for them ? Should i get a TAN no?

    Is deducting TDS in my case mandatory ?

    Thanks in advance..!!!

    Reply
  2. dollymehta

    for the accounting year 2014-15, my professional fees are 650000/= in indian rs. and contract charges Bill are 6500000/- in indian rs. should i get my books audited and file audit report

    Reply
  3. Sourav Tibrewal

    I am an individual maintaining books of accounts.
    My Business Income is 2,50,000 p.a
    My Net Loss is 15,000.
    I want to carry forward this loss to the next AY.
    Do i need to conduct Tax Audit?

    Reply
  4. pk panda

    I have speculation business, i.e stock market trading , investment. i do intraday as well as delivery based trading. last financial yr my trade volume was more 6 crore, do i need to do tax audit and what is my filing date, yes i had a loss of 12 lakh rupees so the losses need to be carried forward.

    pl. answer, thnks.

    Reply

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