Tax audit limit Under Section 44AB of Income Tax Act, 1961

Tax audit limit Under Section 44AB of Income Tax Act, 1961

There is a number of audits conducted under various acts and laws such as statutory audit conducted as per company law, stock audit, GST audit, etc. Income Tax Audit is also conducted as per section 44AB of the Income Tax Act 1961. Tax Audit applicability for FY 2019-20 is when total turnover or gross receipt exceeds Rs 1 Crore in the financial year.

Tax Audit Under Section 44AB of Income Tax Act, 1961

An audit is an official Inspection of the business accounts by an independent body (Tax Auditor) to give assurance of transparency of organization to their users.

There are several types of audit mandates under different laws such as company audit/stock audit / statutory audit/cost audit / interim audit etc.

Similarly, Income Tax Law mandates an audit of books of accounts of the Organization called a TAX AUDIT.

Tax audit applicability for AY 2019-20

As per section 44AB of the Income Tax Act 1961 when turnover/receipts cross the prescribed limit. The income tax audit limit for AY 2019-20 is when the taxpayer exceeds a turnover limit of Rs 1 Cr in the financial year. The assessee may be required to get his account audit in certain other circumstances that are defined in the below-mentioned table.

OBJECTIVES

  • To make sure about the Correctness and proper maintenance of the books of accounts which is certified by the Tax Auditor.
  • The creditworthiness of the Organization useful for their Users (Users include creditors, management, employees, government, etc)
  • Reporting Observation or Discrepancies by the tax auditor after a well-ordered examination of books of accounts.

To report on specific information such depreciation as per Income Tax Act and as per Indian Accounting Standard (if applicable) compliances for various provisions of Income Tax Act

MANDATORY

Every Taxpayer is required to have Tax Audit if their Sales/ Gross Turnover/ Gross Receipts of business exceed Rs 1 crore for the FY 2019-20 and this threshold limit is proposed to be increased to Rs. 5 crores with effect from FY 2020-21 (AY 2021-22)

 CATEGORY OF BUSINESS

 THRESHOLD FOR FY 2019-20

Businesses

 Carry business (other than   opting  presumptive   taxation  scheme)

 Section 44AB of Income-tax act 1961

 Business opting   presumptive taxation   scheme u/s 44 AE & 44 AB

 Declare profits or gains less than the prescribed limit (such as 8% or   6%)

 Business opting   presumptive taxation   scheme u/s 44 AD

 Declare profits or gains less than the prescribed limit and has income   across the basic threshold limit but does not exceed Rs. 2 Crore in   Financial Year, then tax audit will not apply on such entity

Profession

 Carrying on Profession

 Total Gross Receipts < Rs. 50 Lakhs

 Profession Carrying and   eligible for presumptive taxation scheme u/s 44 ADA

  • Declare Profits or Gains lower than the prescribed limit as per the presumptive taxation scheme and if income exceeds the maximum limit not chargeable to the Income Tax
     

Business Loss

 Business incurred Loss and   not opting presumptive   taxation scheme

 Total Sales / Turnover < 1 Crore

 The taxpayer incurred   losses  but Total Income   Exceeds the basic threshold   limit

 Taxpayer subject to tax audit u/s 44 AB

FORM PRESCRIBED FOR AUDIT REPORT

  • Form 3 CA: When Taxpayer is mandated to get his accounts audited by any other law
  • Form 3 CB: When the Taxpayer is not mandated to get his accounts audited under any other law.

In case of either of the above-mentioned Audit Report, the tax auditor must furnish the specific details in Form 3 CD.

Penalty for Non-filing/delay in filing

As per the tax audit applicability for FY 2019-20, there are no changes are taking place in the penalty for non-filing of audit or delay in filing. If any assessee who is required to get his audited fails to do so then the lease of these two may be levied as per the act.

  1. 0.5% of the total turnover/receipts

  2. Rs 1,50,000/-

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FAQs

Q. If a person is required to get an audit by any other law, then is it compulsory for him to get an account audited under the Income-tax act?

A. Yes.

Q.  Tax audit Limit for FY 2019-20?

A. Taxpayer whose turnover exceeds Rs. 1Cr in the financial year, mandatorily required to get his books of account audited.

 

Tax Audit Under Section 44AB of Income Tax Act, 1961

03 Mar

Neha Sahni
Neha Sahni

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