Tax Audit in India: Who Needs to File?

A Tax Audit is an audit of the books of accounts of certain businesses and professionals as required under Section 44AB of the Income Tax Act, 1961. It helps ensure that financial records and tax-related information are properly maintained and reported.

Who Needs a Tax Audit?

Tax audit applicability mainly depends on the nature of business or profession, turnover, receipts and the method of taxation.

Businesses

A business generally requires a tax audit when its sales, turnover or gross receipts exceed ₹1 crore in a financial year.

The limit can increase to ₹10 crore if the prescribed conditions relating to cash receipts and cash payments are satisfied.

Professionals

Specified professionals generally require a tax audit when their gross receipts exceed ₹50 lakh during the financial year.

This can apply to professionals such as doctors, lawyers, architects, engineers, accountants and consultants, subject to the applicable provisions.

Presumptive Taxation

Tax audit may also apply in certain cases where a taxpayer using a presumptive taxation scheme declares income below the prescribed level or does not comply with the relevant conditions.

Tax Audit Forms

Depending on the circumstances, the audit report is generally filed using:

• Form 3CA + Form 3CD – where accounts are already required to be audited under another law.
• Form 3CB + Form 3CD – where accounts are not required to be audited under another law but tax audit is applicable.

Tax Audit Due Date

For taxpayers covered by tax audit, the Income Tax Return due date is generally 31 October (this year extended to 21st November), unless extended by the Income Tax Department.

The tax audit report is generally required to be furnished one month before the applicable ITR due date.

Penalty for Non-Compliance

Failure to comply with tax audit requirements may attract a penalty under Section 271B, generally calculated at 0.5% of turnover or gross receipts, subject to the prescribed maximum limit. Relief may be available where reasonable cause is established.

Tax Audit Support with ECFile Solutions

Tax audit requires proper financial records, supporting documents and compliance with applicable Income Tax provisions.

ECFile Solutions provides professional tax compliance support to help businesses understand their tax audit requirements and complete the necessary documentation and filing process.

Not sure whether your business requires a tax audit? Contact ECFile Solutions for professional assistance.