Section 44AB

Section 44AB – Audit of Accounts

Section 44AB: Section 44AB pertaining to the Income Tax Act, 1961 incorporates the arrangement for a tax audit.

If the annual gross turnover/receipts surpass the prescribed cap, a Tax Audit is required under the Income Tax Act. It is handled by a chartered accountant.

Individuals Who Need To Audit Their Accounts

  • If a person’s net revenue, turnover, or gross receipts (as the case may be) in a given year surpass or exceed Rs. 1 crore. This clause does not extend to an individual who chooses a presumptive taxation scheme under section 44AD and has revenue or turnover of less than Rs. 2 crores.
  • If a person’s total professional receipts for the year reach Rs. 50 lakhs.
  • The income of an individual who is liable for the presumptive taxation scheme of section 44AD but argues that the profits or gains for such a company are lower than the profits or gains measured as per the presumptive taxation scheme of section 44AD income exceeds the amount which is not chargeable to tax.
  • An individual who is entitled to use Section 44AE’s presumptive taxation scheme insists that the income or losses from their company are smaller than the profits and gains measured using Section 44AE’s presumptive taxation scheme.
  • An individual can choose between the taxation schemes described in sections 44BB and 44BBB. Nonetheless, he argues that the income or losses from such a company are smaller than the profits and gains computed under these parts’ taxation system.

What Does An Audit Report Constitute?

The tax auditor must submit his report in a specified format, Form 3CA or Form 3CB, in which:

  • When a person carrying on a business or profession is already required to have their accounts audited by another law, Form No. 3CA is filed.
  • When a person carrying on a business or profession is not allowed to have their accounts audited by any other law, Form No. 3CB is filed.

The tax auditor shall have the specified details in Form No—3CD, which is part of the audit report, in any audit, as stated in previous statements.

Time for Acquiring Audit Report

Anyone subject to section 44AB must have their accounts audited and receive the audit report by the deadline. The audit report must be received on or before September 30th of the relevant financial year.

Under Section 44AB, There Is A Penalty for Failing To Get The Accounts Audited

Noncompliance with the above act provisions would result in a penalty under section 271B of the Income Tax Act.

If an individual fails to get his audit completed by the deadline, they will be fined 1/2 percent of the turnover or gross receipts, up to a limit of Rs. 1,50,000.

However, if there is a fair cause for the mistake, as described in Section 273B, the penalty can be reduced. The following are some examples of situations that have been recognized as “Reasonable Cause”:

  • The Tax Auditor’s Resignation and the Resultant Delay
  • The death or physical incapacitation of the Accounts Spouse
  • Strikes and long-term lockouts are examples of labor issues.
  • Accounts lost due to events outside the Assessors’ jurisdiction, such as fire, theft, etc.
  • Natural Disasters

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