Tax Audit & Applicability for Your Business Made Easy with Accounts2Arun Running a business or profession in India? Then you must know whether a tax audit applies to you. A tax audit, as prescribed under Section 44AB of the Income Tax Act, 1961, is mandatory for certain businesses and professionals to ensure compliance with Indian tax laws.
At Accounts2Arun (CA), we guide businesses, startups, and professionals with accurate Tax Audit & Applicability Services, ensuring timely compliance and avoiding penalties.
What is Tax Audit?
A tax audit in India is a mandatory examination and review of a taxpayer’s financial records and books of accounts by an independent Chartered Accountant (CA). Its primary purpose is to verify that the income declared, expenses claimed, and deductions availed are accurate and fully compliant with the provisions of the Income Tax Act, 1961
Who Needs It?
- For Businesses (Non-Presumptive Taxation):
If gross receipts, sales, or turnover exceed ₹1 crore in a financial year, tax audit is mandatory.
The limit is ₹10 crore if cash receipts and payments do not exceed 5% of total transactions (i.e., 95% or more are digital).
- For Professionals:
If a professional (e.g., doctor, CA, consultant) has gross receipts above ₹50 lakhs, a tax audit is mandatory. - For Presumptive Taxation (Section 44AD / 44ADA)
If you declare income below the presumptive rate (8%/6% for businesses or 50% for professionals) and your income exceeds the basic exemption limit, a tax audit is required. - Other Scenarios:
If you’re in Section 44AE, 44BB, or 44BBB and don’t comply with the scheme conditions, a tax audit may apply.
What Happens If You Don’t Comply?
Non-compliance can result in a penalty of 0.5% of total turnover or gross receipts, subject to a maximum of ₹1,50,000.
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