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  • Writer's picturealkapranjal


Updated: Oct 14, 2022









The Income Tax Act's Section 44AB covers provisions relating to the tax audit conducted by the Income Tax Audit. An audit of a taxpayer's financial records is known as a tax audit. The examination is done to make sure the taxpayer has kept their records and books of accounts up to date. Additionally, the taxpayer's income should be accurately shown in the books of accounts. The person in charge of issuing the tax audit report should check whether the assessee has complied with numerous requirements throughout the audit, including filing income tax forms, accurately describing claims and deductions, and so on. An action taken to stop dishonest tax practices is a tax audit. An action taken to stop dishonest tax practices is a tax audit. A licenced chartered accountant must conduct a tax audit. An overview of Section 44AB, which addresses the idea of a tax audit, is given in this article.

Compliance with Section 44AB

A tax audit must be conducted by the following individuals with the help of a chartered accountant:

  1. Any person who does business and whose annual gross earnings or total turnover surpass Rs. 2 crores (However, this provision does not apply to the persons who opt for a presumptive taxation scheme).

  2. Any person who is actively seeking employment and whose annual gross income exceeded fifty lakh rupees.

  3. A person who is eligible for the presumptive taxation scheme and asserts that the profits and gains for the particular business are lower than what is calculated by the presumptive taxation system and that his or her income is higher than the taxable amount. This clause applies to taxpayers whose sales or turnover are restricted to Rs 2 crores and who adopt a presumptive taxation scheme other than the one described in Section 44AD[1].

Taxpayers should be aware that certain entities, such as a company or cooperative society, are required by law to have their books audited. Under Section 44AB, such entities are exempt from further tax audits. In this situation, all that the concerned taxpayer needs to do is request and provide the specific audit report, accompanied by a report from a chartered accountant in Form 3CA or 3CB. Form 3CD must be filled out with the relevant information.

Under Section 44AB, a tax audit

A Chartered Accountant is required to report the audited accounts using the required forms. The results, observations, and other information should be included in the audit report. Form 3CB must be used to compile the audit report for an audit carried out by Section 44AB, and Form 3CD must be used to submit the details of the audit. People who must have their accounts audited by the IRS or under another legislation must prepare tax audit reports in Form 3CA/3CB, and they must disclose the details in Form 3CD. The chartered accountant must send the tax audit report online, and the taxpayer must then authorise the submissions using their e-filing account.

Infraction of Section 44AB

Anyone who fails to have the accounts audited will be subject to the following penalties:

  • 0.5 per cent of all business sales or 0.5 per cent of all professional receipts for the current fiscal year.

  • A total of Rs. 150,000

The lesser of the aforementioned will be applied as a fine.

[1] Income Tax India (Section 44AD of the Income Tax Act)-

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