A specified class of taxpayers must conduct income tax audits as per the income tax law. This audit is a thorough inspection of the books of accounts of the taxpayer with business or professional income. The primary reason behind tax audits is to ensure the accuracy of financial records and income tax returns (ITRs). This is why the law has mandated certain taxpayers to conduct a tax audit and submit its report. Because tax audits act as a deterrent against tax evasion and discourage entities from misrepresenting income or inflating expenses to lower income tax outgo.
“Tax audit is an examination of the books of accounts of a business or profession from an income tax perspective or angle. It is carried out by practicing chartered accountants mainly to verify the income tax returns of the concerned taxpayer,” says a CA.
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These taxpayers need to conduct a tax audit and submit its report by September 30 Here are the taxpayers who need to conduct a tax audit and submit their report by September 30, 2024, on the ITR e-filing portal:
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,” says another CA. This threshold limit (Rs 1 crore) 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. “If a business opts for presumptive taxation under Section 44AD but its turnover exceeds Rs 2 crore, then also it must get its accounts audited,” he added.
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Presumptive taxation under Section 44AE: “For taxpayers with income from the business of plying, hiring, or leasing goods carriages, if the presumptive income under Section 44AE is less than the actual income, the taxpayer needs to get their accounts audited if the turnover exceeds Rs 10 lakh,” that CA added.
Taxpayers with professional income: A professional, such as a doctor or a chartered accountant, is required to have his accounts audited if his gross receipts from the profession for the financial year for which ITR is being filed exceed Rs 50 lakh. When a taxpayer is carrying on a specified profession under Section 44AA (1) and is eligible for presumptive taxation scheme but reports their profits lower than 50% of gross receipt then tax audit is required. Therefore, for specified professionals to claim profit below 50 per cent of their gross receipts tax audit is mandatory even if their gross receipts is less than Rs. 50 Lakh.
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Even where few conditions of Section 44AD are not satisfied, the taxpayer may be subject to tax audit. For instances, where the taxpayer offers to tax “below” specified threshold – tax audit becomes mandatory. Further, Section 44AD also imposes a lock-in period of 5 years. Once a taxpayer chooses to declare income under Section 44AD, they must adhere to this scheme for 5 consecutive assessment years. If, during this 5-year period, the taxpayer fails to meet the criteria of Section 44AD and their total income exceeds the maximum amount not chargeable to tax, they are required to maintain books of account and other documents and get their accounts audited under Section 44AB.
What is the deadline for the tax audit?
The deadline for submission of the income tax audit report is September 30, 2024, for FY 2023-24 (AY 2024-25). In general, the last date for filing of an income tax audit — Tax audit report as per Section 44AB – is September 30 of the following year (For example: The deadline will be September 30, 2024, for the financial year ending March 31 2024). However, in the case of taxpayers covered by the transfer pricing audit, the last date for completion of the tax audit is October 31, 2024. It must also be noted that the Books of accounts and other related records are required to be maintained for eight years from the end of the relevant financial year.
September 30, 2024, last date for income tax audit for FY 2023-24. In case of assessee covered by the provision of transfer pricing audit, the last date for completion of tax audit will be October 31, 2024.
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What is the deadline for ITR filing along with the audit report?
The deadline for filing ITR is different for various categories of taxpayers. For taxpayers who are liable for tax audit as per section 44AB, the due date to file ITR is October 31, 2024, for FY 2023-24 (AY 2024-25). For certain specified taxpayers that are required to get their accounts tax audited under section 44AB, the deadline is September 30 every year. For FY 2023-24, the last date for tax audit will be September 30, 2024. The last day for filing ITR for taxpayers who are required to get a tax audit done by September 30 is October 31 every year ( October 31, 2024 for FY-23-24). If you miss the deadline, you can still file the ITR after paying a penalty.
Taxpayers for whom tax audit is not mandatory Section 44AB states that if a person is already required to audit their accounts under another law, they don’t need to perform a separate audit for section 44AB.
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It is enough for the person to audit the accounts under that law and obtain the required report, along with a report from a chartered accountant in the format prescribed by section 44AB (Form 3CA and Form 3CD). Therefore, if the books of a company are audited under the Companies Act, it does not need to get the books audited again under the Income Tax Act.
Tax audit is not required for a professional if his gross receipts are up to Rs 75 lakh, provided his cash receipts are less than or equal to five per cent of his total gross receipts.
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