Tax Audit under Income Tax Act - Five Basic things to know - Professionals - Taxation - TIK Share
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Tax Audit under Income Tax Act - Five Basic things to know

Vedanta Deshika


Who is liable to Tax Audit under Income Tax Act, 1961?

As per Sec 44AB, 

If You are carrying on business , where Turnover exceeds Rs 1 Crore in the FY 2013-14


If you are carrying a Profession , where total RECEIPTS exceeds Rs 25 lakhs in the FY 2013-14,

then you must get your accounts audited before filing Income tax Returns

What is the penalty for Non- Compliance by not doing Tax Audit?

Rs 150000 or 1.5% of Turnover/Receipts

Who are the other assesees liable to 44AB Audit ?

If you are an NGO/trust/ Association/Institution who has got exemption under Sec 10 or Sec 11, or a Co-operative Society exempt under Sec 80P , carrying business where turnover exceeds Rs 1 crore, then 44AB audit is mandatory

Another category of persons liable to tax audit are those covered under Sec 44AE, 44BB or 44BBB and assessee declares income lesser than the income presumed under those sections. 

Yet another presumptive section is Sec 44AD, where assessee declares his income less than 8% of Turnover, then he is liable to tax audit provided his income is above basic exemption limit of. However, for business having turnover more than 1 crore FY 13-14 cannot opt for Sec 44AD.

Resident or Non- Resident Assesee ? To Whom tha Tax Audits are Applicable?

 Sec 44AB does not distinguish betwenn between Resident and Non Resident assesees. Hence, if the indian operations of a non resident have a turnover exceeding Rs 1 crore or professional reciepts exceeds Rs 25 lakhs, he is liable to tax audit

What are the Professions notified for Tax audit ? What are some businesses held liable ?

Professions listed out under Sec 44AA and notified :-

  1. Accountancy
  2. Architectural
  3. Authorised Representative
  4. Company Secretary
  5. Engineering
  6. Film Artists/Actors, Cameraman, Director, Singer, Story-writer, etc.
  7. Interior Decoration
  8. Legal
  9. Medical
  10. Technical Consultancy
  11. Information Technology

The following activities have been held to be business:

  1. Advertising agent
  2. Clearing, forwarding and shipping agents
  3. Couriers
  4. Insurance agent
  5. Nursing home
  6. Stock and share broking and dealing in shares and securities
  7. Travel agent.

CA Pulkit Sharma


Tax Audits are performed by Chartered Accountants. Everyone liable to get Tax Audit done should appoint a Chartered Accountant for the audit.

Not filing the tax audit report can lead a big penalty and later covering the entity in scrutiny of Income TAx Department.

Its highly adviced that you check whether your business is liable for tax audit and get the tax audit done.