What is Section 44AB of the Income Tax Act?

The government needs funding to perform necessary duties. And income tax is a way to earn revenue for developing the country. The Income Tax Act, 1961 offers different rules and regulations to govern the taxation process. However, it is important to ensure that businesses and professionals do not commit any type of taxation fraud. Hence, Section 44AB of the Income Tax Act was introduced to offer guidelines on tax audits for specific individuals.

This article helps you understand the concept of tax audit under Section 44AB.

Section 44AB focuses on tax audits made mandatory for certain individuals. If you meet the criteria prescribed under this section, you need to get your accounts audited by a certified Chartered Accountant. It helps the Assessing Officer to ensure accurate calculation and computation of your total taxable income.

Following individuals are required to perform a tax audit from a chartered accountant.

• Any businessman who has a total turnover or gross receipts of over Rs. 1 crore in the previous year (this provision does not apply if you opt for the presumptive tax scheme)

• An individual who is pursuing a profession and earns a gross profit that exceeds Rs. 50 lakh in the previous year

• Any individual who falls under Section 44AD, 44AE, 44AF, 44BB, and 44BBB of the Income Tax Act is eligible to audit their accounts

• Anyone carrying on a business that declares profits as per the presumptive taxation scheme i.e. Section 44AD, but the turnover exceeds Rs. 2 crore in the financial year

• Any business that is not eligible for a presumptive taxation scheme because they opted out during the lock-in period of 5 consecutive years. Such a business is barred from resuming presumptive taxation for 5 years

If you're eligible for tax audit under Section 44AB, you are required to use either of the following forms.

• Form 3CA: You must furnish this audit form when you are already mandated to get your accounts audited by the law.

• Form 3CB: Furnish this audit form when you are not mandated to tax audit your accounts.

• Note: Form 3CD must be furnished in both scenarios since it is a statement showing relevant details.

You are required to file the tax audit report on or before the last date of filing your ITR. Taxpayers that make international transactions must do it by November 30 of the subsequent year, whereas, for others, the due date is September 30 of the following year.

Your tax auditor will furnish the tax audit report online using his login details. Once you have combed through the report, you can either accept or reject it. However, note that you will have to follow the whole process again if you reject it. File your audit report along with income tax returns on or before the dates mentioned above. It is mandatory for these individuals to e-file their tax audit reports and ITR along with accurate details.