Tax Audit Under Section 44AB: Threshold, Due Date, and Penalties

Tax Audit Under Section 44AB

Section 44AB of the Income Tax Act 1961 mandates that certain taxpayers get their accounts audited by a Chartered Accountant before filing their Income Tax Return. This audit ensures that the books of accounts are maintained correctly and that the income reported is accurate. Understanding whether you need a tax audit and meeting the deadline is critical to avoid penalties.

Who Needs a Tax Audit?

A tax audit under Section 44AB is mandatory for:

The ₹10 Crore Extended Threshold

The threshold was increased from ₹1 crore to ₹10 crore for businesses where:

• Cash receipts do not exceed 5% of total receipts, AND
• Cash payments do not exceed 5% of total payments

This effectively means that businesses conducting predominantly digital transactions can have turnover up to ₹10 crore without requiring a tax audit.

Tax Audit Forms

• Form 3CA: Audit report for persons whose accounts are required to be audited under any other law (e.g., Companies Act)
• Form 3CB: Audit report for persons whose accounts are not required to be audited under any other law
• Form 3CD: Statement of particulars – the detailed annexure containing all prescribed information about income, deductions, and compliance

Due Date for Tax Audit Report

The tax audit report must be filed on or before 30 September of the assessment year. For FY 2024-25 (AY 2025-26), the tax audit report must be filed by 30 September 2025.

The Income Tax Return for audit cases must be filed by 31 October 2025. For transfer pricing cases, the extended deadline is 30 November 2025.

Key Clauses in Form 3CD

The tax auditor must report on several critical aspects including:

1. Details of books of accounts maintained and their location
2. Method of accounting and any change in method
3. Details of TDS compliance – whether TDS was deducted and deposited on time
4. GST compliance reporting including ITC claimed vs eligible
5. Details of payments exceeding ₹10,000 in cash (disallowance under Section 40A(3))
6. Depreciation calculation and allowability
7. Compliance with MSME payment timelines under Section 43B(h)

Penalties for Non-Compliance

• Penalty under Section 271B: 0.5% of total sales/turnover/gross receipts, or ₹1,50,000, whichever is lower
• Late ITR penalty: Additional penalty under Section 234F for filing return after the due date
• Loss of carry-forward: Business losses cannot be carried forward if ITR is filed after the due date

Manage Tax Audit Deadlines with FileWithUs.ai

FileWithUs.ai tracks your tax audit deadline alongside your ITR filing due date. The platform alerts you well in advance so you can coordinate with your Chartered Accountant and ensure both the audit report and income tax return are filed on time.