Income Tax Audit in India under Section 44AB

Introduction to Income Tax Audit

Section 44AB of the Income Tax Act mandates an audit of accounts for certain individuals and businesses, ensuring financial transparency and compliance with tax laws. This article provides a detailed and structured overview of the applicability, exemptions, and audit requirements under this section.

Applicability of Section 44AB

The requirement for an audit under Section 44AB applies in the following cases:

Category	Condition for Audit Requirement
Business Entities	Total sales, turnover, or gross receipts exceed ₹1 crore in a previous year.
Exception	If cash transactions (receipts & payments) are ≤ 5%, the audit threshold increases to ₹10 crore.
Professionals	Gross receipts in a profession exceed ₹50 lakh in a previous year.
Presumptive Taxation (Business)	If the taxpayer opts out of Sections 44AE, 44BB, or 44BBB and declares income lower than the presumed profits.
Presumptive Taxation (Profession)	If the taxpayer opts out of Section 44ADA, declares income lower than presumed profits, and total income exceeds the basic exemption limit.
Business Under Section 44AD(4)	If the taxpayer opts out and declares lower income, while total income exceeds the basic exemption limit.

Non-Account Payee Cheques & Drafts are considered cash transactions for the above conditions.

Exemptions from Audit under Section 44AB

The following individuals and businesses are not required to undergo an audit under Section 44AB:

Persons opting for presumptive taxation under:

• Section 44AD(1) (Small Business)

• Section 44ADA(1) (Professionals)

Non-residents earning income under:

• Section 44B (Shipping Business)

• Section 44BBA (Air Transport Business)

Audit under Other Laws:

• If a business is already audited under another law (e.g., Companies Act), the same audit report can be used for Section 44AB compliance.

  Reporting of Audit under Section 44AB (Rule 6G)

Forms for Audit Report

Under Rule 6G of the Income Tax Rules, the audit report under Section 44AB must be furnished in specific formats:

Category	Applicable Form
Persons already required to get audited under another law	Form No. 3CA
Other businesses and professionals required to get audited under Section 44AB	Form No. 3CB
Detailed particulars of the audit	Form No. 3CD

Revision of Audit Report

If there is a subsequent payment requiring recalculation of disallowance under Section 40 or Section 43B, the taxpayer can revise the audit report before the end of the relevant assessment year by obtaining a revised report from a qualified accountant.

Audit Compliance & Procedure

Due Date for Audit

The audit must be completed before the specified date, which is one month prior to the due date for filing the income tax return under Section 139(1) of Income Tax Act.

Audit Report Requirements

• Must be conducted by a qualified accountant i.e a Practicing Chartered Accountant/Chartered Accountancy Firm.

• The report should be furnished in the prescribed form .

• The auditor must sign and verify the report .

Conclusion

Section 44AB plays a vital role in maintaining tax compliance and financial transparency. Understanding its applicability, exemptions, and procedures ensures businesses and professionals adhere to tax laws efficiently.

Tip: Consult a certified tax expert or auditor to determine whether your business or profession falls under the purview of this section and take proactive measures to comply!

Stay tax-compliant and grow your business with confidence!