Tax filing deadline for businesses requiring audit has been extended from October 31, 2024 to November 15, 2024. These businesses must file their IT return along with the audit report by this date.
A tax audit involves an expression of the tax auditor’s opinion on the truth and correctness of certain factual details, furnished by the assessee to the Income Tax Authorities to enable correct assessment of total income considering all allowances, deductions, losses, adjustments, exemptions etc. and determination of tax thereon.
Simply put, a tax audit is a formal examination of accounts of a business/profession per provisions outlined in the Income Tax Act to simplify the computation of income and filing of returns.
Limit for Tax Audit
Section 44AB of the Income Tax Act mandates tax audits for –
- Businesses having turnover exceeding Rs. 1 crore in the preceding financial year (having greater than 5% cash transaction)(Cash Business)
- Businesses having turnover exceeding Rs. 10 crore in the preceding financial year (having less than 5% cash transaction)(Digital Business)
- Professionals with gross receipts exceeding Rs. 50 lakh in the preceding financial year.
Due Date for Filing Tax Audit Report
- For persons filing the report under section 44AB – 30th September of the assessment year.
- For persons liable for transfer pricing audit – 30th October of the assessment year.
Further, for AY 2024-25 (FY 2023-24), the submission of the tax audit report which was earlier on 30th September 2024 has been extended to 07th October 2024.
However, filing income tax returns (ITR) for AY 2024-25 extended to 15th November 2024.
Penalty for non-filing or delay in filing Tax Audit Report
If the business/profession does not get its books of accounts audited as per 44AB – Penal consequences under section 271B of the Income Tax Act shall be attracted.
If there is any incomplete audit and the report is submitted after the due date – 0.5% of the total sales/turnover/gross receipts or Rs. 1,50,000 whichever is lower.
Punishment Clause
In case, if the assessee opts out of section 44AD, the profit limit should be maintained for up to 6 assessment years; if profit is declared below the limit, then the assessee is not eligible for section 44AD up to 6 assessment years. Profit limit shall be – at least 6% for digital receipts and at least 8% for cash receipts.
Forms required in Tax Audit
Rule 6G of the Income Tax Act lists the forms to be filed for businesses/professions under section 44AB. The Central Board of Direct Taxes (CBDT) has released forms such as 3CA (Audit Form), 3CB, and 3CD (Statement of Particulars) so that the auditor can report his observations along with these forms.
Form 3CA-3CD
Applicable for persons who are required to conduct an audit under any other law other than the Income Tax Act like the Companies Act, 2013.
Form 3CB-3CD
Applicable for persons who are required to adhere to the provisions of the Income Tax Act and are not mandated to conduct any audit.
As a taxpayer, it is advisable to adhere to the provisions of section 44AB of the Income Tax Act to accurately present the returns on a timely basis and avoid any delays or penalties. This is for informational purposes and not legal advise.