Audit
Audit refers to an official inspection of the organization’s accounts as well as production of the reports, generally by an independent body. In simpler terms, auditing refers to the systematic assessment or review of something. There are various types of audit that are being conducted under several laws such as statutory audit/company audit, cost audit, and stock audit.
In similar terms, the law of Income Tax Act also mandates an audit which is called Tax Audit. Tax Audit, as the name suggests, refers to an examination and review of the business accounts and transactions carried out by a chartered accountant keeping all the provision of Income Tax Act in mind.
Categories of taxpayers required to get tax audit done
| Category of Person | Threshold |
|---|---|
Business | |
| Carrying on business (not opting for presumptive taxation scheme) | Total sales, turnover or gross receipts exceed Rs.1 cr. in the FY |
| Carrying on business eligible for presumptive taxation under Section 44AE, 44BB or 44BBB | Claims profits or gains lower than the prescribed limit under 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 the total sales, turnover or gross receipts does not exceed Rs.2 cr. in the financial year, then tax audit will not apply to such businesses. |
Profession | |
| Carrying on profession | Total gross receipts exceed Rs.50 lakhs in the FY |
| 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 cr. |
| 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 Rs.1 cr., 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 |