Income Tax Audit Report: Understanding its Significance and Submission Deadline

The income tax return for the fiscal year 2022-23 was due on July 31st. However, the Income Tax Department doesn't just require tax returns from some taxpayers; they also need a tax audit report. 

A tax audit involves a thorough review of an individual's or business entity's financial records. This audit, conducted under Section 44AB of the Income Tax Act, 1961, serves to confirm compliance with tax laws and prevent fraudulent activities.

Who needs to file a tax audit report? 

If a business's annual turnover, sales, or gross receipts exceed Rs 2 crore, the business owner must file an audit report. However, this requirement doesn't apply to individuals who choose the presumptive taxation scheme under Section 44AD. Moreover, businesses with total sales below Rs 2 crore are exempt from mandatory audits.

In addition to the Rs 2 crore threshold, certain individuals or businesses may still be subject to audits. If cash transactions make up less than 5 percent of the total turnover, the mandatory tax audit threshold increases to Rs 10 crore. 

Professionals with gross receipts exceeding Rs 50 lakh in an assessment year must also provide an audit report. Individuals who initially declare profits under Section 44AD of the Income Tax Act but subsequently reduce their profits to fall below the taxable threshold for the next five fiscal years are required to undergo an audit if their income exceeds the non-taxable threshold.

Deadline For Submitting Tax Audit

A tax audit must be conducted by a chartered accountant. The deadline for submitting a tax audit for the financial year 2022-23 is September 30, 2023. 

The audit report should be filed electronically by a chartered accountant. Following this, the taxpayer must approve the audit report through their e-filing account at https://www.incometax.gov.in/iec/foportal/ 

Is the deadline for filing ITR different for those subject to audits?

For individuals or businesses whose accounts require a tax audit, the deadline for filing ITR is October 31.

What is the penalty for non-compliance with section 44AB audit requirements?

If a person whose accounts were supposed to be audited under section 44AB fails to comply and furnish the report without a valid reason, the Assessing Officer may impose a penalty. The penalty will amount to Rs 1.5 lakh or 0.5 percent of the total sales, gross receipts, or turnover of the business/professional for the audited period, whichever is lower."

Also Read: Form 15G and 15H: What is Form 15 & 15H? Understanding the Significance of Form 15G/H