Tax Audit U/s 44AB of Income Tax Act 1961

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Tax Audit U/s 44AB of Income Tax Act 1961. Ark Accounts info@arkaccounts.in.

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Meaning of Tax Audit. As we all know there are various types of audits being conducted under different laws such as cost audit, company audit or stock audit, etc . In the same way tax audit is governed by income tax law, as the name suggests, a tax audit is an examination or review of accounts of any business or profession carried out by taxpayers from an income tax point of view. Under the Income Tax Act, section 44AB deals with the tax audit limit and provision of the Tax Audit . The Audit conducted by the Chartered Accountant of the accounts of taxpayer in pursuance of the requirement of section 44AB is called tax audit. The outcome of the audit is an audit report. This report is drawn by a Chartered Accountant, where he or she gives his or her findings and observations about the person’s compliance under audit..

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Section 44AB of Income Tax Act. Every person carrying on business and maintaining books of account is required to get them audited from a chartered accountant if total sales, turnover or gross receipts from the business during the previous year exceeds Rs . 1 Crore ..

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Recent Amendments. Amendment w.e.f ., 01 st April 2019 – To reduce the compliance burden on small and medium enterprises, section 44AB is proposed to be amended to increase the threshold limit, for a person carrying on business, from Rs . 1 crore to Rs . 5 crores . However, the increased threshold limit of Rs . 5 crores shall be applicable only when cash receipt and payment made during the year do not exceed 5% of total receipt or payment, as the case may be. In other words, more than 95% of business transaction should be done through banking channels. Amendment w.e.f ., 01 st April 2021 – In order to boost non-cash-transaction to promote the digital economy and to further reduce the compliance burden of small and medium enterprises, it is proposed to increase the threshold from Rs . 5 crores (five crores ) to Rs . 10 crores (ten crores ) in cases listed above . Although section 44AB limit is still Rs . 1 crore and 44AD limit is 2 Crore (except specified above). So it creates a lot of confusion among stakeholders regarding the Tax Audit Limit for AY 2022-23..

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Let’s understand the provision of section 44AB:-.

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Let’s understand the provision of section 44AB. further, ( from 01.04.2021) in order to boost non-cash-transaction to promote the digital economy and to further reduce the compliance burden of small and medium enterprises, it is proposed to increase the threshold from “ Rs . five crores ” to “ Rs . ten crores ” in the cases listed above. ( b) Carrying on profession shall if his gross receipts in profession exceed fifty lakh rupees in any previous year; or (c) carrying on the business shall if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AE or section 44BB or section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or (d) carrying on the profession shall if the profits and gains from the profession are deemed to be the profits and gains of such person under section 44ADA and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his profession and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year; or.

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Let’s understand the provision of section 44AB. (e) carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year, get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed : Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, turnover, or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year.

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The chart below show clearly about Tax Audit Limit for AY 2022-23..

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Income Tax Audit Limit for Individual/HUF/firm engaged in Profession.

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The penalty u/s 44AB. If the assessee fails to conduct the audit, he is liable for a penalty of the lower of the following :- ? 0.5% of Turnover or gross receipts . ? Rs . 1,50,000 /- However, according to section 271B, no penalty shall be imposed if reasonable cause for such failure is proved. e.g. Delay caused by the resignation of the tax auditor, natural calamities, etc..

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Income Tax Audit Report Format – Form 3CA/3CB and 3CD.

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