Tax Audit Limit

Tax Audit provisions are laid out under Section 44AB of the Income Tax Act. According to Section 44AB, a Tax Audits are required to be conducted by the following parties:

Business

For businesses, tax audits are required if and when the total sales turnover or gross receipts of the business exceeds Rs.1 crore in any previous year. As per the Income Tax Act, all entities are recognized as a “Business” who conduct an economic activity for earning profits.

Profession

For professionals, tax audits are required if and when gross receipts in the profession exceed Rs.50 lakhs during the financial year. As per Rule 6F of the Income Tax Rules, 1962, any of the following can be considered as a professional:

1. Architects
2. Accountants
3. Authorised representatives
4. Engineers
5. Film Artists
6. Interior Decorator
7. Lawyers
8. Medical Professionals
9. Technical Consultants

Tax Audit Due Date

As per section 44AB of Income Tax Act, the due date to submit tax audit report is 30th September of the assessment year. To meet this deadline, the taxpaying party must file their income tax return and submit their tax audit report on or before the 30th September of the assessment year. In addition to tax audit, if a party is also liable for transfer pricing audit, then the due date for filing tax audit is 30th November of the assessment year.

Form 3CA & 3CD

Following forms/documents must be equipped by any party which is required to get a tax audit: 

Form 3CA – Audit Form
Form 3CD – Statement of Particulars

Tax Audit Penalties

As per Section 271B of the Income Tax Act, if a taxpaying party which is required to obtain a tax audit does not audit their accounts, then a penalty shall be levied from said party. This penalty is equivalent to 0.5% of the turnover or gross receipts up to a maximum of Rs.1,50,000.

Tax Auditor

Tax Auditor Appointment

Tax Audit can be conducted only by a certified Chartered Accountant. The tax auditor for a private/public company must be appointed by the Board of Directors. For a proprietorship or a partnership, auditor can be appointed by the proprietor and any partner respectively. A taxpaying party can appoint multiple auditors for their audit report as well. In this case, all auditors must co-sign the final audit report. In case of differences in audit reports of different auditors, a separate report must be generated which indicates the differences.

The tax auditor(s) must be given an official letter of appointment from the concerned party, on their letter head before going ahead with the tax audit. The appointment letter must include compensation of the auditor, details of any other auditor assigned or else particularly specify that no other auditor has been appointed for that particular financial year and details of the previous auditor.

Tax Auditor Removal

The person/people in-charge of appointing the auditor have the right to remove said auditor as well. Following situations can lead to the removal of a Tax Auditor.  
1. If the Auditor has delayed submission of the audit report to such an extent that the audit report can no longer be generated and submitted before the due date.
2. If the taxpaying party who has appointed the auditor has apprehensions that the appointed auditor may submit an adverse audit report.
3. If the auditor presents or submits an adverse audit report.