Income Tax Audit: Due Date 30th Sept 23

Are you required to get a income tax audit done for A.Y. 2023-24? If your gross receipts or turnover is above the applicable audit limit, you are required to get a income tax audit done. The due date for filing the Income tax audit report is September 30, 2023.
If you fail to get a tax audit done when it is required, you may be subject to penalties. The penalties can be quite heavy, so it is important to make sure that you comply with the Income tax audit requirements. If you have any questions about the tax audit requirements, please consult with a CA.

Income Tax Audit under Section 44AB - Criteria, Audit Report, Penalty

Before understanding what is tax audit, let us understand the term ‘Audit’. Dictionary meaning of the term ‘Audit’ suggests that it is an official inspection of an organization’s accounts and production of report, typically by an independent body. It is also referred to as a systematic review or assessment of something.
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, 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.

Objective of Income Tax Audit

The following Objectives are achieved through Income tax audits:

Make sure the books of accounts are kept up to date, accurate, and certified by a tax auditor.
Following a thorough review of the books of accounts, the tax auditor’s reporting observations and discrepancies are noted.
Must submit the required information, such as tax depreciation, compliance with different income tax law restrictions, etc.

All of these things make it possible for tax authorities to check the accuracy of income tax returns submitted by taxpayers. It also becomes simpler to calculate and verify total income, claim deductions, etc.

Documents require for Income tax audit?

The documents required for income tax audit in India vary depending on the type of taxpayer and the nature of their business. However, some of the common documents that are required for all taxpayers include:

PAN card: The Permanent Account Number (PAN) is a unique identification number issued by the Income Tax Department of India.
Aadhaar card: The Aadhaar card is a 12-digit biometric identification number issued by the Unique Identification Authority of India (UIDAI).
GST registration certificate: If the taxpayer is registered under the Goods and Services Tax (GST) regime, they will need to provide their GST registration certificate.
Profit and loss account: The profit and loss account is a financial statement that shows the income and expenses of a business for a given period of time.
Balance sheet: The balance sheet is a financial statement that shows the assets, liabilities, and equity of a business as of a particular date.
Bank statements: Bank statements for the entire financial year are required to verify the cash flows of the business.
Invoices: Invoices for all purchases and sales made during the financial year are required to support the entries in the profit and loss account and balance sheet.
Tally books: Tally books are the books of accounts maintained by the business. They are required to verify the entries in the profit and loss account and balance sheet.
Other relevant documents: Other documents that may be required for income tax audit include rent receipts, salary slips, investment statements, and tax returns.

The specific documents required for income tax audit will be determined by the auditor. The auditor will review the taxpayer’s records and determine which documents are necessary to ensure that the accounts are accurate and compliant with the law.

Income Tax Audit fee

The professional fee for income tax audit in India varies depending on the size and complexity of the business, the location of the auditor, and the experience of the auditor. However, the minimum recommended fee for income tax audit by the Institute of Chartered Accountants of India (ICAI) is as follows:

Class A cities: Rs. 10,000 and above
Class B cities: Rs. 7,500 and above
Class C cities: Rs. 5,000 and above

The actual fee charged by an auditor may be higher than the minimum recommended fee, depending on the factors mentioned below .

The size and complexity of the business: The larger and more complex the business, the more time and effort the auditor will need to spend on the audit, and the higher the fee will be.
The location of the auditor: Auditors in major cities typically charge higher fees than auditors in smaller cities.
The experience of the auditor: More experienced auditors typically charge higher fees than less experienced auditors.
The specific requirements of the client: The auditor may charge a higher fee if the client has specific requirements for the audit, such as a shorter turnaround time or a more detailed report.

Get Quotation for Income Tax Audit

Fee for Income Tax Audit vary from person to person. Discuss your file with our team to get Quotation on Income Tax Audit.

Call us: +91 9818209246

Who Needs an Income Tax Audit?

A taxpayer is required to have a tax audit carried out if the sales, turnover or gross receipts of business exceed Rs 1 crore in the financial year. However, a taxpayer may be required to get their accounts audited in certain other circumstances. We have categorised the various circumstances in the tables mentioned below:

Amendments in the above provision:

Finance Act 2020: The threshold limit of Rs 1 crore turnover for a tax audit is proposed to be increased to Rs 5 crore with effect from AY 2020-21 (FY 2019-20) if the taxpayer’s cash receipts are limited to 5% of the gross receipts or turnover, and if the taxpayer’s cash payments are limited to 5% of the aggregate payments.

Finance Act 2021: With effect from 1st April 2021, the threshold limit of Rs 5 crore is increased to Rs 10 crore in case cash transactions do not exceed 5% of the total transactions.

We present the various categories of taxpayers below:

Category of person	Threshold
Business
Carrying on business (not opting for presumptive taxation scheme*)	Total sales, turnover or gross receipts exceed Rs.1 crore in the FY 2022-23. If cash transactions are up to 5% of total gross receipts and payments, the threshold limit of turnover for tax audit is increased to Rs.10 crores (w.e.f. FY 2020-21)
Carrying on business eligible for presumptive taxation under Section 44AE, 44BB or 44BBB	Claims profits or gains lower than the prescribed limit under the presumptive taxation scheme
Carrying on business eligible for presumptive taxation under Section 44AD	Declares taxable income below the limits prescribed under the presumptive tax scheme and has income exceeding the basic threshold limit.
Carrying on the business and is not eligible to claim presumptive taxation under Section 44AD due to opting out for presumptive taxation in any one financial year of the lock-in period i.e. 5 consecutive years from when the presumptive tax scheme was opted	If income exceeds the maximum amount not chargeable to tax in the subsequent 5 consecutive tax years from the financial year when the presumptive taxation was not opted for
Carrying on business which is declaring profits as per presumptive taxation scheme under Section 44AD	If income exceeds the maximum amount not chargeable to tax in the subsequent 5 consecutive tax years from the financial year when the presumptive taxation was not opted for
Carrying on business which is declaring profits as per presumptive taxation scheme under Section 44AD	If the total sales, turnover or gross receipts does not exceed Rs 2 crore in the financial year, then tax audit will not apply to such businesses.
Profession
Carrying on profession	Total gross receipts exceed Rs 50 lakh in the FY 2022-23
Carrying on the profession eligible for presumptive taxation under Section 44ADA	1. Claims profits or gains lower than the prescribed limit under the presumptive taxation scheme 2. Income exceeds the maximum amount not chargeable to income tax
Business loss
In case of loss from carrying on of business and not opting for presumptive taxation scheme	Total sales, turnover or gross receipts exceed Rs 1 crore
If taxpayer’s total income exceeds basic threshold limit but he has incurred a loss from carrying on a business (not opting for presumptive taxation scheme)	In case of loss from business when sales, turnover or gross receipts exceed 1 crore, the taxpayer is subject to tax audit under 44AB
Carrying on business (opting presumptive taxation scheme under section 44AD) and having a business loss but with income below basic threshold limit	Tax audit not applicable
Carrying on business (presumptive taxation scheme under section 44AD applicable) and having a business loss but with income exceeding basic threshold limit	Declares taxable income below the limits prescribed under the presumptive tax scheme and has income exceeding the basic threshold limit

What constitutes an audit report?

Tax auditor shall furnish his report in a prescribed form which could be either Form 3CA or Form 3CB where:

Form No. 3CA is furnished when a person carrying on business or profession is already mandated to get his accounts audited under any other law.
For instance, A company is required to get its accounts audited compulsorily under the Companies Act 2013. So, it will furnish Form 3CA.
Form No. 3CB is furnished when a person carrying on business or profession is not required to get his accounts audited under any other law.
A proprietorship entity or partnership firm, having a turnover of more than 1 crore and not opting for presumptive income scheme, is not required to get its accounts audited under any other law except income tax. So, it will furnish Form 3CB.

Along with either of the forms mentioned above, the tax auditor shall also furnish Form 3CD which forms part of the audit report and contains the prescribed particulars.

Due Date for Income tax audit?

A taxpayer has to obtain the audit report on or before 30th September of the relevant assessment year unless otherwise extended. For Financial Year 2022-23, Income Tax Audit Due Date is 30th September 2023.

Penalty for not filing the Income tax audit report

Assessing Officer may impose penalty u/s 271B if the taxpayer doesn’t get his accounts audited or file the audit report. A minimum penalty can be 0.5% of the total sales, turnover or gross receipts, which can go up to Rs. 1,50,000. However, no penalty will be imposed if the taxpayer gives reasonable cause for non-compliance, such as the following:

Delay caused by the death or physical inability of the partner responsible for accounts
Delay caused by resignation of the tax auditor
Delay caused by labour issues such as strikes or lock-outs
Natural calamities
Delay caused by loss of accounts due to theft or fire, or incidents that are not under the taxpayer’s control

FAQ's on Income Tax Audit

What is the audit limit for AY 2023-24?

The audit limit for AY 2023-24 is Rs. 1 crore for businesses with more than 5% cash transactions and Rs. 10 crores for businesses with less than 5% cash transactions.

Who is required to get their accounts audited for AY 2023-24?

The following taxpayers are required to get their accounts audited for AY 2023-24:

Businesses with gross receipts or turnover exceeding Rs. 1 crore.
Professionals with gross receipts exceeding Rs. 50 lakhs.
Persons covered under Sections 44AD, 44AE, 44AF, 44BB and 44BBB, who are declaring lower profits from business than what is estimated

What are the documents required for income tax audit for AY 2023-24?

The following documents are required for income tax audit for AY 2023-24:

PAN card
Aadhaar card
GST registration certificate
Profit and loss account
Balance sheet
Bank statements
Invoices
Tally books
Other relevant documents

What is the professional fee for income tax audit for AY 2023-24?

The professional fee for income tax audit for AY 2023-24 varies depending on the size and complexity of the business, the location of the auditor, and the experience of the auditor. However, the minimum recommended fee for income tax audit by the Institute of Chartered Accountants of India (ICAI) is as follows:

Class A cities:** Rs. 10,000 and above
Class B cities:** Rs. 7,500 and above
Class C cities:** Rs. 5,000 and above

What are the penalties for not getting accounts audited for AY 2023-24?

The penalties for not getting accounts audited for AY 2023-24 are as follows:

A penalty of Rs. 25,000 for individuals and Rs. 50,000 for companies.
A penalty of 1% of the undisclosed income, or Rs. 1 lakh, whichever is higher.
The assessee may also be denied certain benefits, such as the benefit of carry forward of losses and set off of losses.