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Tax Audit is conducted as per the provisions of Section 44AB of the Income Tax Act, which gets applicable on a class of taxpayers. The purpose of tax audited is to ascertain whether the compliance of various provisions of the Income Tax Act and the rules made thereunder has been compiled by the assessee or not. The tax audit can be conducted by a Chartered Accountant in whole time practice. Following are the conditions which are necessarily required to be fulfilled.

  • Must be a person under Income Tax Act
  • Must carry on business or profession
  • Must maintain books of account
  • Object to earn profit or gain
  • Income is taxable or allowable the tax

Applicability of tax audit: Following persons are compulsorily required to get their account under Section 44AB of the Income Tax Act and to file the tax audit report in form No. 3CA/3CB and 3CD. Before 30th September after the end of the financial year.

1. A person carrying on business whose turnover or gross receipt during the financial year exceeds Rs.2 crore. For this purpose the meaning turnover includes Profit on sale of Export License/Duty Drawback/Cash Assistance, Gross interest income received by Money lender, Exchange rate difference on export sales, Advance received & forfeited from customers, where excise duty is included in turnover, the corresponding amount should be distinctly shown as debit item in the profit and loss account. However, it does not include Sale/Purchase of Fixed Assets, Sale Proceeds of Assets held as Investments, Rental Income, Income by way of Interest unless assessable as business income, Any expense which is reimbursable to the agent by the client.

2. A person carrying on profession and the gross receipt from such profession exceeds Rs. 50 lakhs. For the purpose of income tax the expression profession includes professions of Accountancy, Architectural, Authorised Representative, Company Secretary, Engineering, Film Artists/Actors, Cameraman, Director, Singer, Story-writer, etc., Interior Decoration, Legal, Medical, Technical Consultancy.

Due date and penalty:

The due date within which the tax audit report must be filed with the income tax department is before 30th September of the relevant assessment year. However, in case the taxpayer is engaged in international transaction than the last date of filing the tax audit report is 30th November. The penalty prescribed is Rs.1,50,000/- of 0.5% of total turnover whichever is lower. However, if reasonable cause is shown the penalty can be waived off.

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