According to Section 44AB, Income tax act 1961 (As amended by finance act, 2017) accounts of persons carrying business/profession need to be audited.
Every person carrying on: –
| Business | Total sales/Turnover/Gross receipts exceeds INR 1 Crore in any previous year. |
| Profession | Gross receipts exceeds INR 50 lacs in any previous year. |
| Business (Section 44AE Section 44BB Section 44BBB) | Profits & gains from business are deemed to be the profits & gains of such person under the specified sections, and the person has claimed his income to be lower than profits of the business in any previous year. |
| Profession (Section 44ADA) | Profits & gains from profession are deemed to be the profits & gains of such person under the specified sections, and the person has claimed his income to be lower than profits from the profession and his income exceeds the maximum amount not chargeable to income tax in any previous year. |
| Business (Section 44AD-4) | Provision of the section 44AD (4) Income tax act 1961, are applicable in his case and his income exceeds the maximum amount not chargeable to income tax in any previous year. |
These previous year accounts must be audited by the accountant before the specified date and furnish the report duly signed & verified by such accountant including such particulars as may be prescribed.
Read other blog: STATUTORY AUDIT OF FINANCIAL STATEMENTS OF COMPANY
Who will not be covered under this section?
- Person who declares his profits & gains in previous year as per section 44AD (1) of Income tax act 1961, and his total sales/turnover/gross receipts does not exceeds INR 2 Crore in any previous year.
- Person whose income is in the nature specified under section 44AB/44BBA of Income tax act 1961.
- Person who is required to get his accounts audited under any other law, then it shall be sufficient with provisions of this sections that person get accounts of such business/profession audited under such law before the specified date and further report by an accountant in the form prescribed under this section.
IMPORTANT SECTIONS RELATED WITH SECTION 44AB, INCOME TAX ACT
Section 44AE: Provision for computing profits/gains of business from plying, hiring or leasing goods carriages
Section 44BB: Provision for computing profits/gains in connection with business of exploration of mineral oils
Section 44BBB: Provision for computing profits/gains of foreign companies engaged in business of civil construction & various turnkey projects.
Section 44ADA: Provision for computing profits/gains of profession on Presumptive basis
Section 44AD (4): Provision for computing profits/gains of business on Presumptive basis
Section 44AD (1): A sum equal to 8% of total turnover/gross receipts of assesse in previous year OR a sum higher than aforesaid sum claimed to have been earned by assesse, shall deemed to be the profits/gains chargeable to tax under the head “Profit & gains from business/profession”
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FREQUENTLY ASKED QUESTIONS (FAQ’s)
Q. What is auditing?
A. Auditing is a process which comes into place once the whole process is completed. It creates checks & balance, review & inspection on the whole process. There are various types of audits for example: Cost audit, tax audit, company audit covered under cost accounting law, income tax law, and company law respectively.
Chartered Accountant conducting the Tax audit is required to furnish the report in the format (Form 3CA/3CB & 3CD) as prescribed in income tax law.
Q. What are the due dates of filing tax audit report?
A. According to section 44AB, every person who is required to get its accounts audited should get its audit report on or before due date of filing of return of income i.e. 30th September of following assessment year.
For example: tax audit report for the financial year 2017-18 must he furnished on or before 30th September, 2018.
Exception: International transaction/domestic transaction specified under section 92E, must file the audit report in format (Form 3CEB) on or before 30th November of the assessment year.
Related Blog: INCOME TAX RULES FOR FOREIGN NATIONALS IN INDIA
Q. Who will audit the books of accounts?
A. Chartered accountant authorised by ICAI are required to prepare and audit the accounts as specified by the Income tax act.
Q. What is the format of these audit reports?
Form 3CA: case where the accounts of the business or profession of a person have been audited under any other law
Form 3CB: Audit report under section 44AB of the Income -tax Act 1961, in the case of a person referred to in clause (b) of sub – rule (1) of rule 6G
Form 3CD: Statement of particulars required to be furnished under section 44AB of the Income-tax Act, 1961 PART – A
Form 3CEB: Report from an accountant to be furnished under section 92E relating to international transaction(s) and specified domestic transaction(s).
Q. What is the penalty in case of any delay in account audit?
A. If any person fails to gets his accounts audited for year(s), the Assessing officer (AO) can impose a penalty. The penalty shall be lower of the two:-
(1) 0.5% of the Total sales/Turnover/Gross receipts
(2) INR 1, 50,000
Q. If any person is required to get its accounts audited under any other law, then is it mandatory to get his accounts audited once again as per section 44AB?
A. No, Section 44AB categorically specifies that if any person get its accounts audited under any other law, then he does not have to comply with requirements mentioned under the section
Chartered Accountant by profession, CA Sanket Agarwal has an experience of above11 years in Cross Border compliance , Import Export , International Taxation & is a passionate content creator.