Follow the legal mandate to avoid non-compliance.
There are a variety of audit being conducted under different laws like company audit/statutory audit conducted under company law provisions, stock audit , cost audit, etc.Similarly, income tax law also mandates an audit called ‘Tax Audit’.
The Tax auditor shall furnish his report in a prescribed form that could be either Form 3CA or Form 3CB where:
The Form No. 3CB is furnished when the person carrying on business or profession is not
A taxpayer is required to have a tax audit carried out if sales, gross receipts of business exceed Rs 1 crore in the financial year. However, taxpayer may be required to get their accounts audited in certain other circumstances.
Tax auditor shall furnish tax audit report online by using his login details in capacity of ‘CA’. Taxpayer shall also add CA details in their login portal. Once tax auditor uploads the audit report, same should either be accepted or rejected by taxpayer in their login portal. If rejected for any reason, all the procedures require to be followed again till the audit report is accepted by the taxpayer.
You must file the tax audit report on or before due date of filing the return of income. This is 30 November of subsequent year in case taxpayer has entered into an international transaction and 30 September of the subsequent year for other taxpayers.
Tax audit is compulsory for the following categories of taxpayers:
There are different laws in India that focus on laying down the rules and regulations unique to various types of audits – cost audit, income tax audit, stock audit, company or statutory audit as per company law, etc. Section 44AB of the Income Tax Act, 1961, lays down the provisions for income tax audit in India.
Income tax audit, as evident from the name, is aimed at analysing the accuracy of income tax returns filed by individuals and businesses in an assessment year. A tax auditor from an external agency is mandated to assess returns filed from income, expenditures and deductions and other parameters, as per Section 44AB of the Income Tax Act, 1961. The tax audit procedure streamlines the computation of tax returns. The Chartered Accountant of the agency performing the tax audit has to present their observations and findings in Form 3CA or Form 3CB, and Form 3CD.
As per Section 44AB of the Income Tax Act, 1961, tax audit limit for professionals, businesses and presumptive taxation scheme are:
Business: Tax audit for businesses pertains to those whose gross receipts or total business sales turnover exceeds Rs. 1 crore in the previous assessment year. The term ‘business’, under the Income Tax Act, 1961, implies to any economic activity that earns profits and gains. To quote Section 2(3), a business can be “any trade, commerce, manufacturing activity or any adventure or concern in the nature of trade, commerce and manufacture.”
Profession: For a profession or professional, tax audit is applicable if gross receipt in the concerned profession is more than Rs. 50 lakhs in any of the previous assessment year. As per Rule 6F of the Income Tax Rules, 1962, this profession can be any of the following:
Presumptive Taxation Scheme: When an individual is enlisted under the presumptive taxation scheme under Section 44AD and total sales or turnover exceeds Rs. 2 crores, tax audit is considered to be mandatory.
Also, any individual enlisted under the presumptive taxation scheme who claims that the gains of the business are lower than the gains calculated as per the presumptive taxation scheme, tax audit is considered to be mandatory.
To prepare report in Form 3CA/3CB including annexure in Form 3CD as per div 44AB of the Income-Tax Act. We’ll help with your IRS tax audit by: