Under India’s income tax laws, businesses must report their income after getting their books audited by credited chartered accountants (CAs) under Section 44AB of the Income Tax Act, 1961.
This section ensures appropriate reporting of income and expenses by businesses. By bringing credited CAs into the picture, the government makes them accountable for accurate reporting of business incomes.
See also: Presumptive tax scheme under Section 44AD of Income Tax Act
Who has to get their books audited under Section 44AB?
- Businesses with an annual turnover of more than Rs 2 crore: Businesses who have earned more than Rs 2 crore in the previous year must get their books audited. However, they will not be liable to do so in case they opt for the presumptive tax scheme under Section 44AD.
- Professionals with an annual turnover of more than Rs 50 lakh: Professionals who have earned more than Rs 50 lakh in the previous year must get their books audited.
All about: Section 234A of Income Tax Act:
Applicable forms
An audit report conducted under Section 44AB must be prepared in Form 3CB. The audit details must be reported in Form 3CD.
Due date for tax audit
Entities and individuals must get their books audited and report the same on or before September 30 of the financial year. Failure to do so would attract the following penalty, whichever is lower:
*0.5% of the total sales or 0.5% of the total receipts in the profession of the current financial year
*Rs 1,50,000
FAQs
What is the difference between 44AB and 44AD?
While Section 44AB calls for an audit of business account books, Section 44AD is a presumptive taxation scheme (PTS) to relieve small taxpayers from maintaining account books and getting them audited.
When is 44AB applicable?
Section 44AB applies to businesses and professionals earning more than a specific annual income.
What is the limit for 44AB?
The cut-off is over Rs 2 crore in the case of businesses and more than Rs 50 lakh in the case of professionals.
