Tax Audit Tips

Tax Audit or Section 44AB Audit

Information related to Tax Audit u/s 44AB of the Income Tax Act, 1961.

On this page:

Is 44AB Audit Mandatory for all?

44AB Audit is not mandatory for all. You need to get your accounts audited, only if you satisfy any one of the following conditions:

  1. If the total sales, turnover or gross receipts of your Business exceeds Rs.1 Crore for the financial year ending 31.03.2013 (Rs.60 Lakhs for the financial year ending 31.03.2012 and Rs.40 Lakhs for any other financial year ending before 31.03.2012), or

  2. gross receipts of your profession, (e.g. Doctors, Engineers etc.) exceeds Rs.25 Lakhs for the financial year ending 31.03.2013 (Rs.15 Lakhs for the financial year ending 31.03.2012 and Rs.10 Lakhs for any other financial year ending before 31.03.2012), or

  3. if you carry on a business & claim lower profits and gains under any of the sections 44AD, 44AE, 44BB, 44BBB.

Note: Let's cover the sections 44AE, 44AD etc., later.

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44AB Audit Due date

The due date for getting your accounts audited by an accountant for the previous year is, 30th September of the assessment year.

For Example if your Business Income exceeds 60 Lakhs, for the previous year 2011-12 (i.e. from 01.04.2011 to 31.03.2012, then the due date for tax audit is 30.09.2012.

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Who can perform 44AB Audit?

Only a Chartered Accountant registered with the Institute of Chartered Accountants of India as full time practicioner is eligible to conduct 44AB Audit.

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Let's get ready for Tax Audit

If you know what your auditor is about to look in to your books of accounts, then it will be easy for you to be prepared. The Tax Auditor has to cover 32 points during the Audit.

Let's quickly go through the 32 points here!

S.No Fact
1 Name of the assessee
2 Address
3 Permanent Account Number
4 Status
5 Previous year ended
6 Assessment year
7 Partners & their Capital, change in the partners or members(if any)
8 Nature of Business, & change details (if any)
9 Books of accounts maintained?.
10 (44AD, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB Details)
11 Method of accounting employed
12 Method of valuation of closing stock & Capital asset converted into stock-in-trade
13 Amounts not credited to P/L A/C
14 Particulars of depreciation
15 Deduction allowable u/s 33AB & 35 etc.,
16 Details about, Bonus/Commission paid & Contribution received from employees.
17 Amounts debited to the profit and loss account
18 Payments made to specified persons
19 Amounts deemed to be profits and gains under section 33AB or 33ABA or 33AC
20 Any amount of profit chargeable to tax under section 41
21 Any sum referred to in clause (a), (b), (c), (d), (e) or (f) of section 43B.
22 Value Added Tax credits
23 Amount borrowed otherwise than through an account payee cheque.
24 Loans or Deposits exceeding the limit specified.
25 Details of brought forward loss or depreciation allowance
26 Chapter VI-A Deduction Details
27 Complied to Chapter XVII-B - TDS
28 Stock Details
29 Details of tax on distributed profits ( in case of Domestic Co.,)
30 Cost Audit Report(if any)
31 Audit Report under Central Excise Act (if any)
32 Accounting ratios

Overwhelming? Don't be. Based on the common problems arising during the 44AB Audit, the six points given below needs to be taken care by you.

  1. Accounting, Depreciation and Stock valuation Methods/Policies.

  2. List of Payments made to Related Parties.

  3. Transaction (Payment in a sum exceeding rupees twenty thousand) only through "A/C Payee" cheques.

  4. Compliance of TDS Provisions.

  5. EPF & ESI due date & Compliance.

  6. Transactions related to Loans/Advances.

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Books of Accounts to be Maintained

  1. a cash book;

  2. a journal, if the accounts are maintained according to the mercantile system of accounting;

  3. a ledger;

  4. carbon copies of bills, whether machine numbered or otherwise serially numbered, wherever such bills are issued by the person, and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by him;

  5. original bills wherever issued to the person and receipts in respect of expenditure incurred by the person or, where such bills and receipts are not issued and the expenditure incurred does not exceed fifty rupees, payment vouchers prepared and signed by the person;

  6. In addition, medical professionals need to maintain, a daily case register in Form No. 3C & an inventory of the stock of drugs, medicines and other consumable accessories used for the purpose of his profession.

Note: You shall keep the "Books of Account" including, ledgers, day-books, cash books, account-books and other books,

  1. in the written form or

  2. as print-outs of data stored in a floppy, disc, tape or

  3. any other form of electro-magnetic data storage device.

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How long should I keep the Books of Accounts?

You have to keep the books of account and other documents specified, for a period of six years from the end of the relevant assessment year.

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Where should I keep the Books of Accounts?

You have to keep the books of account and other documents specified, at the place where you are carrying on the Business or Profession.

In case if the Business or Profession is carried on in more than one place, then at the principal place of your profession or Business.

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What if I don't maintain the books of account?

You may have to pay the penalty of Rs 25,000.

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What will happen if I don't get my books of account audited?

Penalty u/s 271B is imposed under two situations:

  1. If you don't get your books of account audited within the due date, or

  2. if you don't furnish the 44AB Audit report within the return filing due date.

The assessing Officer may ask you to pay, a sum equal to,

  • one-half per cent of the total sales, turnover in case of Business, or

  • one-half per cent of the gross receipts in case of profession, or

  • Rs 1,50,000,

whichever is less.

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How to furnish the Tax Audit Report while filing the IT return?

Your Tax Auditor will provide the Report in Form 3CA or 3CB. But Form 3CD will have all the data.

After the introduction of annexure less forms, you need to just fill in the Form ITR-4, with the Audit Report details provided in Form 3CD. Check the various heads in ITR-4 relevant to 44AB Audit report.

ITR4 - General Audit Details

TDS-Sch1

ITR4 - Balance Sheet

TDS-Sch1

ITR4 - PL A/c

TDS-Sch1

Stock Details

TDS-Sch1

Other 44AB Details

TDS-Sch1

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Tax Audit Tips FAQ

Question 1: I receive Salary from a company and other than that, I have other sources of Income also. My company deducts TDS when disbursing the salary to me. My total income is above 40 Lacs (Salary + Other income), but if other Income is only taken into account, its under 40 Lacs. Now my query is - whether Tax auditing is required for me?

Answer:

44AB Audit is required, if the Business turnover exceeds 60 Lakhs or Professional Gross receipts exceeds 15 Lakhs. In your case you didn't mention the nature of the "Other Income".

If it's Professional Income, and the gross receipt exceeds 15 Lakhs in any previous year, you may need to get your books audited.

Otherwise, no need for tax audits.

Question 2: I am a government employee. I do intraday share trading sometimes. The total turnover in intraday is more than 2 crores of rupees. Whether I had to go for tax audit under section 44AB of Indian Income Tax?

Further, how should I show this income in my tax return?

Answer:

Intraday Share Trading is treated as Speculation. If the turnover exceeds 60 Lakhs, your books needs to be audited.

The income can be shown as "Speculative Business Income" in your IT Return.

Get answers for your Tax Questions »

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Related Topics

Tax Due Dates »

Tax Rates »

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