Form No. 3CA, Form No. 3CB and Form No. 3CD are the Income tax forms required to be submitted in case of Income Tax Audit. Due date of filling of return along with getting your books of accounts audited is 30th September of the relevant assessment year. However, due to COVID-19, Income Tax audit date for AY 2020-21 is extended to 31st October, 2020. Due to the same reason, the due date of Income Tax return for FY 2019-20 is extended to 30th November 2020.
Cases when Income Tax audit is compulsory
1. Income from Business
When a person is carrying or have a business whose turnover or gross receipt or sales is more than Rs 1 crore and not opted for any presumptive scheme in the previous relevant assessment year is obligated to get its books of accounts by Tax Auditor.
2. Income from Profession
When a person have a profession whose gross receipt is more than Rs 50 lakh in the previous relevant assessment year is obligated to get its books of accounts by Tax Auditor.
3. Income under section 44AE, 44BB, 44BBB
Where a person claims that his/her income is less than the deemed profits or gains computed under section 44AE (Presumptive taxation for Transporter), section 44BB (Non Resident in supplying Service or hiring Plant and Machinery), section 44BBB (Foreign Co in Turnkey Projects), he/she is obligated to have their books of accounts audited. Read More at Section 44AE of Income Tax, 1961
4. Income under section 44AD
A person is obligated to get his books of accounts compulsorily audited u/s 44AB if he claims to have profit or gains less than 8% (in case of full receipts in Cash) /6% (Other cases) of Turnover in the previous of the relevant assessment year. The income must exceeds the basic exemption limit i.e. Rs 2, 50,000 or Rs 3,00,000 or Rs 5, 00,000. Read More at Section 44AD Of Income Tax Act, 1961
5. Income under section 44ADA
If the Gross receipts of the person who furnishes his income u/s 44ADA exceeds Rs 50 lakh then the person is bound to get his books of accounts audited u/s 44AB. The income must exceeds the basic exemption limit i.e., Rs 2,50,000 or Rs 3,00,000 or Rs 5,00,000. Read More at Section 44ADA of Income tax Act, 1961
6. Turnover more than Rs 2 crore
If the turnover of the person who furnishes his income u/s 44AD exceeds Rs 2 crore then the person is bound to get his books of accounts audited us 44AB.
Read Also: ITR-3 : Who can file itr 3 | How to file ITR 3?
Penalty on failure of Audit
In case of non audit of books, Penalty under section 271B of Income Tax ACt, 1961 is levied, which is lower of –
- 0.5% of turnover/Gross Receipts ; or
- Rs. 1,50,000
For example, BabaTax has Turnover of Rs 2 crore in PY 2019-20. In case, if BabaTax fails for audit of books of account for Income tax purpose. The penalty of Rs 1 lakh (lower of 0.5% X 2 Crore = 1 lakh or Rs 1,50,000) will be levied. However, according to section 271B, no penalty attracts, in case of reasonable cause for failure of audit.
Read Also: GST Turnover v/s Income Tax Turnover
Important Points to be remembered
1. The computation of the income u/s 44AD is as follow:-
Assessable income: the estimated or deemed at 8% of the total turnover/ gross receipt or Actual income declared by the assesse, whichever is higher.
However, the presumptive rate of 6% of total turnover/gross receipt will be applicable in respect of amount which is received by an account payee cheque or by an account payee bank draft or by use of electric clearing system through a bank account.
Read Also: Income Tax Late Fee and Interest on delay in filing ITR
2. The computation of the income u/s 44ADA is as follow:-
Assessable income: the estimated or deemed at 50% of the total turnover/ gross receipt OR Actual income declared by the assesse, whichever is higher.
Read Also: Income Tax Rate For AY- 2020-2021/ FY- 2019-2020
The author of above article is Krittika Pahwa.
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