Section 44AB of the Income Tax Act lays down detailed rules for a tax audit. It requires certain taxpayers (businesses and professionals) to have their books of accounts audited by a Chartered Accountant and submit an audit report along with their income tax return.
Objectives of Tax Audit under 44AB
- Ensure accurate bookkeeping – verify correct and legitimate maintenance of accounts .
- Expose errors or frauds – detect discrepancies, under-reporting, or manipulations in records .
- Verify compliance – ensure tax laws, deductions, depreciation, and TDS/TCS are correctly applied .
- Support accurate tax computation and transparency – helps assess true income and tax obligations .
Applicability Criteria
Business:
- Turnover exceeds ₹1 crore in a financial year;
- Or up to ₹10 crore if cash receipts/payments are ≤ 5% of total transactions.
Professionals:
- Gross receipts over ₹50 lakh in a year.
Exception for presumptive schemes:
- Applies if using presumptive taxation under Sections 44AD, 44ADA, 44AE, etc., but declaring income below prescribed rates and total income exceeds basic exemption.
Other scenarios:
- Loss declared with turnover > ₹1 crore, income above exemption limit.
Due Dates & Reporting
- Audit report & ITR for non-TP cases: by Sept 30 following financial year.
- For transfer-pricing or international transactions: by Oct 31.
- FY 2024–25 deadline extended to Oct 7, 2024, per CBDT.
Audit Report Forms
- Form 3CA + 3CD: if already audited under another law.
- Form 3CB + 3CD: if not audited under another law.
Penalties for Non-Compliance
Under Section 271B, a penalty applies if audit isn’t done or report isn’t filed on time:
- 0.5% of turnover/gross receipts, or ₹1.5 lakh, whichever is lower.
- Reasonable cause (e.g., natural calamity, auditor resignation) can lead to waiver .
Summary Table
| Feature | Details |
|---|---|
| Objective | Validate accounts, reveal errors/frauds, ensure legal compliance |
| Who needs audit? | Businesses > ₹1 cr (≤10 cr with low cash); Professionals > ₹50 L |
| Exceptions | Presumptive scheme users declaring low profits + income > exemption |
| Forms | 3CA/3CB + 3CD via CA |
| Due date | Sep 30 (non-TP); Oct 31 (TP); FY 24–25 extended to Oct 7, 2024 |
| Penalty (271B) | 0.5% of turnover or ₹1.5L (lower) unless valid cause |
Final Takeaway
Section 44AB ensures that taxpayers above key thresholds maintain transparent, accurate accounts audited by a CA. It boosts accountability, enhances compliance, and helps the tax department rely on reliable financial records. Failing to comply leads to penalties—though waivers are possible with genuine reasons.
