What is an audit?
An audit is referred to as an official inspection of the account of any organisation or entity and gives a full production report as an independent body. In other words, it can also be said as a precise review or evaluation of something.
What is a Tax audit?
There are many kinds of audit which are available such as Company audit or statutory audit, cost audit, stock audit etc. based on the different laws of the Company. The Tax Audit is a form of audit set up by the Income Tax Law. This audit is carried out by taxpayers from the Income Tax Department who examine the review of accounts of any business or profession. The Tax Audit pROCess helps to ease the pROCess of income computation for the filing of a return.
If you fall under a certain class of taxpayers, then you have to get your accounts audited by a chartered accountant (CA), as per the as per section 44AB. This report from CA is either submitted in the Form 3CA or 3CB.
Who needs Tax Auditing under section 44AB?
According to Section 44AB of Income Tax, there are different categories of taxpayers who have different threshold limits and who need to get a tax audit done. These categories of taxpayers are listed below:
If a person is in business with total sales and his gross receipts in business exceed Rs. 1 crore, for a year, he needs to have a Tax Audit.
If a person does business and his profits and gains fall under any of the sections of 44AE, 44BB or 44BBB of the Income Tax Act and he has claimed his income less than the taxable limit which has been prescribed he needs a Tax Audit.
If a person does business and his profits and gains fall under the Section 44AD of the Income Tax Act and he has claimed his income less than the taxable limit but the income is rather much more than the maximum taxable limit.
It is however not applicable if the person conducts business and furnishes all the tax details according to the presumptive taxation scheme under Section 44AD. Also, if his total turnover does not exceed Rs 2 Crore.
If the gross receipts of a person in profession exceed 25 lakhs in any of the previous years, he needs to get his account audited.
A person has to get the Tax Audited if he but he claims his profits and gains for the profession to be lower than the profit and gains computed according to the presumptive taxation scheme under 44ADA and his income exceeds the amount which isn’t chargeable to tax.