Income Tax Audit u/s 44AB: Know Meaning, Turnover Limit and Due Date
There are some specified individuals and businesses who are required to get their accounts audited under the income tax law. During the tax audit, the auditor reviews and analyses the financial statement of a business or a professional to ensure that the financial details, such as income, expenses, and deductions, are reported correctly in the income tax return (ITR).
Section 44AB of the Income Tax Act outlines the provisions about the taxpayers who are required to get their accounts audited by a Chartered Accountant. If the turnover of a company or individual crosses the specified threshold limit, then a tax audit is mandatory. This ensures that the books of accounts is accurate. If the auditor observes a mismatch in the books of account, then they report it. In short, the main objective of a tax audit is to ensure that the books of account and other records are properly maintained.
Turnover Limit for Tax Audit
- For Business, if the turnover of gross receipts is more than Rs 1 crore in a financial year or Rs 10 crore (where cash transactions are not more than 5% of total transactions), then a tax audit is required.
- For Professionals, if the gross receipt from the profession is more than Rs 50 lakh in a financial year, then a tax audit is required.
Due Date to Get Accounts Audited
Under Section 44AB, a taxpayer should get audited and get the audit report on or before September 30th of the relevant assessment year. For Example, the tax Audit report for FY 2025-26 should be obtained before September 30, 2026. Taxpayers must follow this deadline to avoid legal troubles.
Penalty for Not Getting Accounts Audited
If a taxpayer does not get their accounts audited, then they will have to face a penalty. The penalty will be the lower of the following amounts:
- 0.5% of the total sales, turnover or gross receipts
- Rs 1,50,000.
However, if the reason for not getting your accounts audited is genuine and is valid, then the penalty shall not be levied. These reasons include:
- Natural Disaster
- Delay Due to Tax Auditor Resignation
- Loss of accounts due to uncontrollable events
- Death of the partner in charge of the accounts
- Illness or death of the person managing the account.
Tax Audit plays a key role in ensuring that the business or the professionals are declaring their income, expenses and other financial information correctly.
