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Section 44AB of the Income Tax account is related to the Income Tax audit of accounts of individuals whose income exceeds a crore. Thus, if your annual income exceeds one crore, you fall under the ambit of this Act. So you must get a certified chartered accountant to audit your accounts.

The Government of India introduced this Act to help the assessing officers of the Income Tax department compute the total taxable income of professionals quickly.

Penalties for non-compliance of Section 44ab Income Tax Act

  1. If you are not submitting the Income Tax Audit Report under Section 44AB of the Income Tax Act, you are liable to pay the penalty of 0.5% of the total annual turnover. The maximum penalty you have to pay is Rs 1.5 Lakhs for non-compliance with the Income Tax Audit Report under Section 44 AB.

  2. If the reason for non-compliance with the Income Tax Audit Report is valid, the IT Department of India cannot ask you to pay the penalty under section 271B. The following are the reasons for non-compliance are taken into consideration by the Income Tax Department of India:

    • If there is a delay in the income tax audit from the side of the authorised CA

    • If there is a delay in submitting the income tax audit report by you due to the unfortunate demise of the auditor or CA

    • Suppose there is a delay in submitting the income tax audit report because the auditor or CA does not have access to operate your account. The reason for the same may be riots, strikes, theft, etc.

    • If there is a delay in the income tax audit report due to unforeseen disasters or a natural calamity

Section 44AB Applicability

  • All individuals whose net income worth exceeds the taxable income limit, irrespective of the turnover in the preceding financial years, are liable to get their accounts audited as per Section 44AB of the Income Tax Act.

  • All those individuals whose annual income is lower than the taxable limit set by the government of India are also liable to get their accounts audited from the certified chartered accountants.

  • All those individuals whose income is not crossing the taxable limit, but the assessing officer wants to audit the accounts of an individual. The officer can do it by passing an order under Section 142(2A) of the Income Tax Act.

What Forms Should You Submit under Section 44AB?

Here is the list of the forms you have to submit under Section 44AB of the Income Tax Act. These forms are submitted according to rule 6G of the Income Tax Act:

  • Form Number 3CA: Audit form

  • Form Number 3CD: This form reflects the statements showing various particulars

All those individuals whose accounts are not part of the taxable limit, but the assessing officer passes the order to get the accounts audited. They are required to fill the following forms:

  • Form Number 3CB: Audit form

  • Form Number 3CD: This form reflects the statements showing various particulars

Submitting Income Tax Audit Report under Section 44AB

Individuals who submit the tax audit report under Section 44AB of the Income Tax Act must do so by the 30th of September of each assessment year. Make sure you are e-filing the income tax audit reports.

Can individuals revise the already submitted income tax audit report even if it is carried out according to Section 44AB of the Income Tax Act?

No, there is no provision for revising the Income Tax Audit report after being submitted. One can only modify the income tax audit report if the IT Department issues any amendment. Moreover, in such cases, only the authorised auditor or CA can alter the report.

Section 44AB Issue: Mismatch of Audit Flag in XML and Application

Suppose you submit the Income Tax Audit report under Section 44AB of the Income Tax Act and face the mismatch of the audit flag in XML and application. Then, you have to discard the old version showing the mismatch error.

Make sure that you are not disposing of the old version of the ITR excel utility. Download the latest version of the ITR excel utility to create XML from the e-filing portal to submit the Income Tax Audit report under Section 44AB of the Income Tax act.

Amendments in Section 44AB

Business

Category

Threshold

Running a business but not opted for a presumptive scheme of taxation

When the total receipts, sales, and turnover is above crore in the preceding Financial Year

Carrying on business that is meeting the eligibility criteria as per the presumptive taxation under Section 44AE, 44BBB, 44BB

Claiming profit or any gains that is less than the prescribed limit set under presumptive taxation scheme by the Government of India

If you are running a business that becomes eligible for presumptive taxation under Section 44AD

If it is declaring the taxable income less than the limits prescribed under the presumptive taxation scheme, but the income has exceeded the standard threshold limit

If you are in a business that does not meet the eligibility to avail of the benefit of presumptive taxation under Section 44AD as you opt-out of the Presumptive taxation scheme in any of the accessing financial years. It comes with a five years lock-in period.

If the income has exceeded the maximum amount but is not chargeable for the subsequent five years from the financial year after opting out presumptive taxation scheme

If you are in a business that is making profit declaration as per the presumptive taxation scheme under the Section 44 AB of the Income Tax Act of India

If income is exceeding the amount as set by the income tax department of India but not be considered as tax in the continuous five years when the presumptive taxation was not opted for

If you are running a business that is making a declaration of profits as a part of the presumptive taxation scheme under Section 44AD

The total receipts or sales made from business or annual turnover is less than Rs 2 crore in the financial year. No tax audit of such businesses will take place as per Section 44AD of the Income Tax Act.

Profession

Category

Threshold

If you are in a profession

Gross receipts must not be above Rs 50 Lakhs in the Financial Year

If you are in a profession that meets the eligibility criteria of presumptive taxation under Section 44ADA of the Income Tax act.

  • Claiming profits or enjoying gains according to the prescribed limit set under the presumptive taxation scheme

  • Income above the maximum amount not chargeable to income tax

At Bajaj Markets, you can learn more about the applicability of Section 44AB of the Income Tax act.

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