Amendments of Section 44AB have been made to reduce the compliance burden on small taxpayers and to bring more transparency in the tax system. The requirement of tax audit will apply only to those taxpayers whose turnover exceeds the specified limit and will not be applicable to those whose turnover is less than the limit.
SECTION 44AB: RECENT AMENDMENTS UNDER INCOME TAX ACT
There are various kinds of audits being conducted under different laws such as company audit/statutory audit conducted under company law provisions, cost audit, stock audit, etc. Similarly, income tax law also mandates an audit called ‘Tax Audit’.
As the name itself suggests, a tax audit is an examination or review of accounts of any business or profession carried out by taxpayers from an income tax viewpoint. It makes the process of income computation for filing of return of income easier.
What are the objectives of a Tax Audit
- Ensure proper maintenance and correctness of books of accounts and certification of the same by a tax auditor
- To report prescribed information such as tax depreciation, compliance with various provisions of income tax law, etc.
- Reporting observations/discrepancies noted by tax auditor after a methodical examination of the books of account.
Applicability of Tax Audit
Section 44AB of the Income-tax Act, 1961 Every person
(a) Carrying on business shall, if his total sales, turnover, or gross receipts, as the case may be, in business exceeds, one crore rupees (w.e.f AY 2013-14) in any previous year shall get his accounts audited by a chartered Accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such Chartered Accountant and setting forth such particulars as may be prescribed.
In the following circumstances, the figure of rupees one crore is substituted by ten crore rupees.
Provided that in the case of a person whose—
(a) an aggregate of all amounts received including the amount received for sales, turnover, or gross receipts during the previous year, in cash, does not exceed five percent of the said amount; and
(b) Aggregate of all payments made including amount incurred for expenditure, in cash, during the previous year does not exceed five percent of the said payment, this clause shall have effect as if for the words “one crore rupees”, the words ” [ten] crore rupees” had been substituted:] [Provided further that for the purposes of this clause, the payment or receipt, as the case may be, by a cheque drawn on a bank or by a bank draft, which does not account payee, shall be deemed to be the payment or receipt, as the case may be, in cash
For a person who carries on his/her profession shall get the accounts audited if
(b) carrying on profession shall if his gross receipts in profession exceed fifty lakh rupees in any previous year; or If the profit is shown lower than the profits as per section 44AE, 44BB, 44BBB shall get the accounts audited
If the profit is shown lower than the profits as per section 44AE, 44BB, 44BBB shall get the accounts audited
(c) carrying on the business shall if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AEor section 44BB or section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or
If income exceeds the exemption limit and the assessee has shown less profit as per section 44ADA shall get the accounts audited
(d) carrying on the profession shall if the profits and gains from the profession are deemed to be the profits and gains of such person under section 44ADAand he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his profession and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year; or
If the income exceeds the exemption limit and the provision of sub-section 4 of section 44AD is applicable shall get the accounts audited
(e) carrying on the business shall if the provisions of sub-section (4) of section 44ADare applicable in his case and his income exceed the maximum amount which is not chargeable to income-tax in any previous year
Section 44AB is not applicable as per the following provision
Provided further that this section shall not apply to the person, who derives income of the nature referred to in section 44B or section 44BBA, on and from the 1st day of April 1985 or, as the case may be, the date on which the relevant section came into force, whichever is later :
The following proviso says if books are audited as required under any other law, an audit report is submitted as required under such other law,
and a further report on the basis of same books audited as required under other law shall be submitted by Chartered Accountant as required under this section of Income Tax
Provided also that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section,
if such person gets the accounts of such business or profession audited under such law before the specified date and furnishes by that date the report of the audit as required under such other law and a further report by an accountant in the form prescribed under this section.