The income tax law mandates a specific class of taxpayers to conduct income tax audits. This audit involves a thorough inspection of the taxpayer’s books of accounts, particularly those with business or professional income. The primary aim of tax audits is to ensure the accuracy of financial records and income tax returns (ITRs). By mandating certain taxpayers to conduct a tax audit and submit its report, the law aims to deter tax evasion and discourage misrepresentation of income or inflation of expenses to reduce income tax payments.
What Is a Tax Audit?
In essence, a tax audit examines the books of accounts of a business or profession from an income tax perspective. It is typically carried out by practicing chartered accountants to verify the income tax returns of the concerned taxpayer.
Tax Audit Deadline and Applicable Taxpayers
The deadline for eligible taxpayers to conduct a tax audit and submit its report is September 30. The following categories of taxpayers are required to adhere to this requirement:
- Taxpayers with Business Income:
- If the turnover or gross receipts of a business exceed Rs 1 crore in a financial year, the business must get its accounts audited. This threshold is increased to Rs 10 crore if cash receipts and cash payments during the year do not exceed 5% of the total receipts or payments. Additionally, businesses opting for presumptive taxation under Section 44AD must also undergo an audit if the turnover exceeds Rs 2 crore.
- Under presumptive taxation, for taxpayers with income from the business of plying, hiring, or leasing goods carriages, an audit is required if the turnover exceeds Rs 10 lakh.
- Taxpayers with Professional Income:
- Professionals, such as doctors or chartered accountants, need to have their accounts audited if their gross receipts from the profession for the financial year exceed Rs 50 lakh. Additionally, for specified professionals claiming profit below 50% of their gross receipts, tax audit is mandatory irrespective of their gross receipts being less than Rs. 50 Lakh.
Deadline for Tax Audit and ITR Filing
The deadline for submission of the income tax audit report is September 30. For taxpayers covered by the transfer pricing audit, the last date for completion of the tax audit is October 31. It’s important to note that books of accounts and related records are required to be maintained for eight years from the end of the relevant financial year.
The due date to file ITR for taxpayers liable for tax audit under section 44AB is October 31. If the taxpayer misses the deadline, they can still file the ITR after paying a penalty.
Exemption from Tax Audit Requirements
According to Section 44AB, if a person is already required to audit their accounts under another law, they are not required to perform a separate audit for section 44AB. Additionally, a tax audit is not required for a professional if their gross receipts are up to Rs 75 lakh, provided their cash receipts are less than or equal to five per cent of their total gross receipts.