Tax Audit

Tax & Deductions

A tax audit is a mandatory examination of accounts by a Chartered Accountant under Section 44AB of the Income Tax Act. Required if business turnover exceeds Rs 1 Cr (Rs 10 Cr if 95%+ transactions are digital) or professional receipts exceed Rs 50L.

In detail

Tax audit triggers:nBusiness: turnover above Rs 1 Cr (Rs 10 Cr if primarily digital) in a yearnProfessional: gross receipts above Rs 50L in a yearnPresumptive scheme opt-out: if opted out of 44AD/44ADA and income is below threshold, still no audit needed but cannot re-enter for 5 yearsnnPenalty for non-compliance: 0.5% of turnover or Rs 1.5L, whichever is less. Plus interest on tax.nnAudit report (Form 3CA/3CB + 3CD): must be filed before ITR due date.

Real-life example

🇮🇳 India example

Anand runs an IT consultancy with Rs 75L annual receipts. Below Rs 50L threshold for professionals? No -- Rs 75L exceeds Rs 50L. He needs a tax audit (Form 3CD). He engages a CA for Rs 12,000 who reviews his books, certifies income and deductions, and files the audit report by September 30.

Frequently asked questions

If I am under presumptive taxation (44AD), do I need a tax audit? ▼

No, as long as you declare income at or above 8% of turnover and your turnover is within limits. The whole point of 44AD is to avoid audit. Tax audit is required only if you claim income below 8% of turnover, forcing you out of 44AD.