Income Tax Audit under Section 44AB: Criteria, Processes, & Due Dates

If you’re a business owner or a professional in India, you’ve possibly come across the term Section 44 AB of the Income Tax Act. It might seem difficult, but understanding this section is important for keeping your tax legal. In simple terms, Section 44 AB requires that particular taxpayers must undergo a tax audit so that their financial records are accurate.

What is Section 44 AB of the Income Tax Act?

Section 44AB of the Income Tax Act requires some taxpayers to undergo a tax audit. This audit guarantees that firms and professionals follow tax requirements and have accurate financial records.

Tax Audit Due Date Under Section 44AB

• The tax audit report must be filed on or before September 30th of the assessment year.
• Any delay in submission attracts penalties.
• If the taxpayer is also subject to a transfer pricing audit, the due date for submitting is November 30th of the assessment year.

Who is Required to Get a Tax Audit Under Section 44 AB?

You may be looking for your business requires a tax audit under Section 44 AB. So, here’s what you should know:

Category of person	Applicable Criteria: Tax Audit Threshold Income Tax
Business (Excluding persons who have opted for presumptive taxation scheme under Section 44AD)	Total sales, turnover, or gross receipts in business for the year exceed Rs. 1 crore. (Rs. 2 Cr in the case of section 44AD(1).
Business	The threshold limit for a person carrying on business is increased to Rs. 10 Crores if,Receipts in cash do not exceed 5% of all receipts.Payment in cash does not exceed 5% of all payment
Professionals	If gross receipts exceed ₹50 lakhs in a financial year.
Presumptive Taxation Scheme Cases	If a taxpayer has opted for a presumptive taxation scheme (Section 44AE, 44BB, or 44BBB) but claims lower profits than the prescribed limit.

Penalty for Not Filing a Tax Audit Report

If a taxpayer who is required to request a tax audit does not have the accounts examined, a penalty may be imposed under Section 271B of the Income Tax Act. Failure to complete the tax audit carries a penalty of 0.5% of turnover or gross revenues, up to a maximum of Rs. 1,50,000. While failure to keep up with audit standards usually results in a penalty, there are some exceptions for acceptable grounds. The judicial bodies and courts have accepted the following as acceptable causes:

• Physical disability or death of the partner responsible for taking the accounts.
• Natural Disasters or Calamities
• Retirement of the tax auditor, causing a delay in finishing the audit.
• Longer labor difficulties, such as protests or shutdowns.
• Loss of accounting records caused by events beyond the taxpayer’s control.

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