Call Audit Turnover Applicability- New Tax Audit Limits in Detail
As the deadline for filing Tax Audit report approaches, it is very important to know who all are required to get their accounts audited under Income Tax Act. In simple words, an audit is a systematic examination or review of financial records. Section 44AB of Income Tax Act, 1961 provides the rules and regulations for the tax audit of an entity or a firm. This tax audit is conducted to ensure that the taxpayer has maintained all the required details about his income, taxes, deductions, etc. A chartered accountant conducts this tax audit and submits a Tax Audit report. A Tax Audit is an detailed examination, verification and assessment of the books of accounts of an entity or firm carrying business or profession. In Tax audit transactions related to income, expenses, deductions, and the organization’s taxes are reviewed. The criteria to determine whether an assessee is required to get his accounts audited under income tax depends upon the turnover.
Turnover Limits for Tax Audit under Income Tax Act:
| Category of a person | Threshold for Tax Audit |
| In case of Business | |
| 1. Carrying on business (not opting for presumptive taxation scheme) | Total sales, turnover or gross receipts are more than Rs. 1 crore in the FY orIf cash transactions are up to 5% of total gross receipts and payments, the threshold limit of turnover for tax audit is Rs.10 crores (w.e.f. FY 2020-21 as per Budget amendment) |
| 2. Carrying on business eligible for presumptive taxation under Section 44AE, 44BB or 44BBB and opted for the same in previous year | Claims profits or gains lower than the prescribed limit under the presumptive taxation scheme |
| 3. Carrying on business qualified for presumptive taxation under Section 44AD | Declares taxable income below the limits prescribed under the presumptive tax scheme and has income exceeding the basic threshold limit. |
| 4. Carrying on the business and is not eligible to claim presumptive taxation under Section 44AD due to opting out of presumptive taxation in any one financial year of the lock-in period. | If income exceeds the maximum amount not chargeable to tax in the subsequent 5 consecutive tax years from the financial year when the presumptive taxation was not opted for |
| 5. Carrying on business, which is declaring profits as per presumptive taxation scheme under Section 44AD | If the total sales, turnover, or gross receipts do not exceed Rs. 2 crore in the financial year, then tax audit will not apply to such businesses. |
| In case of Profession | |
| 1. Carrying on profession | Total gross receipts are more than Rs. 50 lakhs in the FY |
| 2. Carrying on the profession eligible for presumptive taxation under Section 44ADA | – Claims profits or gains lower than the prescribed limit under the presumptive taxation scheme- Income exceeds the maximum amount not chargeable to income tax |
| In case of Business Loss | |
| 1. Loss from carrying on of business and not opting for a presumptive taxation scheme | Total sales, turnover, or gross receipts exceed Rs 1 crore |
| 2. taxpayer’s total income exceeds the basic threshold limit but he has incurred a loss from carrying on a business (not opting for a presumptive taxation scheme) | In case of loss from business when sales, turnover or gross receipts exceed 1 crore, the taxpayer is subject to tax audit under 44AB |
| 3. Carrying on business (opting for a presumptive taxation scheme under section 44AD) and having a business loss but with income below a basic threshold limit | Tax Audit not applicable |
Due Date for Filing Income Tax Audit Report:
The due date for completion of income tax audit is 30th September 2024 for the FY 2023-24, in case of assessees covered under the provisions of transfer pricing audit, due date for completion of tax audit will be 31st October 2024.
Penalty of Non-filing or Delay in Filing Tax Audit Report:
Following is the penalty if a person fails to get the tax audit done.
Lower of :
- 0.5% of the total sales, turnover or gross receipts
- Rs.1,50,000
The failure to submit a tax audit report may also lead to tax authorities disallowing certain deductions or exemptions claimed in the tax return. The accrual of interest charges on any unpaid tax liability arising from the absence of a tax audit report is another consequence.
Conclusion:
Income Tax Audit is a mandatory requirement in case the criteria are met as mentioned in the above provisions. One has to make sure that all the requirements are fulfilled otherwise there are many penal provisions mentioned in the act. Tax Audit plays a critical role in ensuring that businesses comply with tax regulations and maintain transparency in their financial practices.
About Author:
CA Chinmay Shirish Agate
Chinmay Agate is a Practicing Chartered Accountant having 4+ years of experience and expertise in the field of Direct Taxation and Auditing compliances. In the past, he worked in various CA firms and comes with wide industry experience from services, retail to manufacturing to trading where he has handled various complex assignments. He has keen interest in Forex and Derivative knowledge as well as fundamental analysis.