All about Income Tax Audit u/s 44AB for FY 2023-24:

Under income tax any business cross certain turnover or meet contiation mentioned under section 44AB of Income tax act then Tax audit shall be applicabe. Tax Audit for FY 2023-24 is inspection or scrutiny of accounts by Chartered Accountant and reporting to Government authorities. Tax audit help to identify fraudulent activity , non compliances etc. After crossing of threshold turnover limit then Tax audit is mandatory. Assessee need to appoint Chartered Accountant firm produce then books of accounts , accounting records etc.

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Applicability of tax audit for FY 2023-24:

For FY 2023-24 income tax audit is applicable on the basis of turnover of business or receipts from profession.  All the mandatory provisions related to tax audits are given in section 44AB.

For business entities opting presumptive taxation: In case of businesses opting for presumptive taxation under section 44AD general turnover limit is increased to Rs.2 (two) crore for financial year. Also, for entities covered under sections 44AD, 44AE, 44AF, 44BB, 44BBB (who declare profits as a particular percentage of turnover), if declared profit is below prescribed limit and income exceeds basic exemption limit then tax audit becomes applicable to them.

Tax Audit limit of Rs.10 crore is applicable to business entities:  Threshold limit of Rs.10 (ten) crore is applicable if person carry most of transaction (i.e. 95% of transactions) online. In other words, to be eligible for this cash transactions shall not be more than 5%. If turnover/gross sales of business entities exceed Rs.1 (one)crore during financial year and entity does not opt for presumptive taxation then tax audit will be applicable for those business entities.

For professionals not opting presumptive taxation: When gross receipts of professional exceed Rs.50Lakhs for financial year then tax audit becomes applicable.

For professionals opting presumptive taxation: Professionals who opt for presumptive taxation under section 44ADA, claims profits lower than prescribed limit and income exceeds basic exemption limit becomes mandatorily liable for tax audit.

Applicability of tax audit can be summarized through below table:

 

Sr. No.	Particulars	Business	Tax Audit	Condition
1	Turnover > 10 Cr	Other than professional	Yes	1.Not opting for presumptive taxation  2.If cash transactions are up to 5% of total gross receipts and payments
2	Turnover < 10 Cr	Other than professional	No
3	1Cr < Turnover < 10 Cr	Other than professional	Yes	1.Not opting for presumptive taxation  2.If cash transactions are more than 5% of total gross receipts and payments
4	Turnover < 2 Cr & opted for 44AD	Other than professional	No	Opted for section 44AD
5	Carrying on business under section 44AD, 44AE, 44AF, 44BB, 44BBB	Other than professional	Yes	Claims profits or gains lower than the specified limit under presumptive taxation scheme
6	Turnover > 50 Lac	Professionals	Yes	1.Not opted for presumptive taxation under 44ADA 2. opted for 44ADA but Claims profits lower than the specified limit under presumptive taxation scheme
7	Turnover > 50 Lac	Professionals	No	Opted for presumptive taxation under 44ADA and declare profits as per prescribed limit of presumptive taxation.

 

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Is audit required if turnover is less than 1 crore?

If the turnover is equal to Rs1 crore or less than that and person not showing the profit under section 44AD and is lower than 8% of the sales, then person would not be required to get his or her accounts audited according to section 44AB but they are needed to maintain the records of accounts.

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For which companies tax audit is compulsory?

Income tax audit applicability is in addition to compliance of statutory audit under companies act. Tax audit is mandatory for all companies, LLPs whose turnover/ gross receipts exceeds the prescribed threshold. Limits applicable to other business entities and professionals are similarly applicable to companies. In case of business if turnover exceeds Rs.10crore and for professional’s gross receipts exceeding Rs.50 Lakhs will be liable for tax audit.

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How to calculate turnover for Tax Audit FY 2023-24:

While checking applicability of tax audit compliance turnover is very important key factor. The concept of Tax audit turnover applies to all Income Tax assessees who should undergo a tax audit. In general, turnover refers to total amount of sales made by entity over a particular period of time. But while calculating turnover for the purpose of tax audit in income tax, it refers to total sales made by assessee after making required adjustments for goods returned, price adjustments and trade discounts.

What is not to be included in calculation of turnover for tax audit? 

• Sale or purchase of fixed assets
• Rental /Interest income
• Advances from customers
• Cash discount, trade discounts
• Returned goods
• Sale proceeds of any shares, securities, debentures, etc., held as investment

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Due Date for Tax Audit of FY 2023-24:

It is very much necessary for person to whom tax audit is applicable to get their accounts audited and file audit report before the due date i.e. 30^th September of that year. So, due date for tax audit of FY 2022-23 will be 30^TH September 2024. CBDT has power to grant extension for time limit of audit as it deem fit.

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Penalty for Tax Audit FY 2023-24:

If any assessee to whom tax audit is applicable fails to get tax audit done within due date then penalty will be levied on assessee. And quantum of penalty will be least of following:

• 5% of the sales, turnover, gross receipts
• 1,50,000

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Limitation on Chartered Accountant for the number of Tax Audits:

In India, only Chartered accountants or a firm of Chartered accountants has authority to sign tax audit report. But in spite of this fact, there is limit on number of tax audit filing by CA. The maximum number of audits allowed to Chartered Accountant is restricted to 60 tax audits. And incase of partnership firm this limit will apply to each member individually.

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Accounts audited with any other law:

If a person is required to get his books of accounts audited under any other law such as statutory audit as per company act then such taxpayer is not required to audit its books of accounts again for income tax purpose, provided accounts are audited under such any other law before due date of filing return. Now, taxpayer has to only get the audit report as per income tax regulation before return’s due date.

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Tax audit forms for FY 2023-14:

In case assessee is covered under provisions of this act for tax audit then assessee is required to file the following form together with income tax return:

1.Form 3CA & Form 3CD– These Forms should be used in case where the Accounts of the business or profession of a person have already been audited under any other Law. In such case second audit need not be performed to comply with requirements of income tax.

2.Form 3CB & Form 3CD–These Forms are used in case where the Accounts of the business or profession are audited exclusively to satisfy requirements of Income tax act.

3.Form 3CE: Audit report in respect of non-residents and foreign companies receiving royalty or fees for technical services and liable to get audited.

Assessee to whom audit provisions are applicable have to submit Income tax return (ITR) till 30^th September.

All these forms are required to be filed and submitted through income tax online portal only. Tax auditor shall file tax audit report online by using his login details as a CA and assessee is also required to add that CA as auditor using his login. After tax auditor uploads tax audit report online , it is duty of taxpayer to accept it on online portal.  

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Can Tax Audit report be revised?

Yes, tax audit report for FY 2023-24 can be revised. If there is error or omission of facts in tax audit report then tax audit report can be revised.

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Penalty Waiver in Tax Audit for FY 2023-24 ?

Yes, penalty waiver for non submission of tax audit it allowed. Provided reasonable cause is provided by Assessee.  If the tax audit report is not submitted on time or before the deadline, no penalty under section 271B will be enforced. The provisions of section 271B must be applied, however, if the audit report is not submitted by the deadline.

No Penalty for Failure of Tax Audit under section 271B of the Income Tax Act,1961 in case of Reasonable Causes with Case Laws

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