Tax audit is an additional compliance to be done apart from filing of the income tax return in case of certain situations and persons only.
As per the Income-tax Act 1961, it is obligatory of the following persons (carrying on business or profession) to get his/ her accounts audited under section 44AB by a Chartered Accountant:
- If the total sales, turnover or gross receipts in business exceeds Rs. 200 lakhs (in case of individuals/ partnerships) or Rs. 100 lakhs (in case of Companies); or
- If the gross receipts in profession exceeds Rs. 50 lakhs in any of the previous years; or
- If the assessee covered under the provision of section 44AD claims his profits to be lower than the profits deemed under presumptive basis and his income exceeds the basic exemption limit; or
- If the assessee carrying on a profession under section 44AA (like a doctor, lawyer, CA, technical/ software/ business consultant, photographer etc) covered under the provision of section 44ADA claims his profits to be lower than the profits deemed under presumptive basis and his income exceeds the basic exemption limit
A tax audit report in the prescribed form is issued and certified by a Practicing Chartered Accountant by September 30 (Forms prescribed are 3CA/ 3CB & 3CD).
In case tax audit is applicable to you, then the due date of July 31 doesn’t apply, and you can file your income tax returns (along with the tax audit report) by September 30. This date is now further extended to Nov 30, 2020 for the AY 2020–21 due to the COVID relaxations.
In case tax audit is applicable but accounts are not audited/ audit report not furnished, penalty provisions under section 271B can apply. Hence, to avoid future complexities from the income tax department, it is always preferred to get the audit done timely, if applicable, rather than receiving a notice and paying penalties due to non-compliance.