What is tax audit under Section 44AB?

Section 44AB of the Income Tax Act generally focuses on Tax Audit under the Income Tax Act. Tax audit is required to make sure that the taxpayer has maintained the books of accounts as well as other records and they furnish the taxpayer’s income. Moreover, it is intended to verify whether the taxpayers have complied with various requirements like filing of income tax returns, accurate specification of claim and income tax deductions, etc.

Tax Audit is a measure by the Income Tax Department to curb fraudulent tax practices. The Tax Audit should be carried out by a practicing Chartered Accountant.

The following taxpayers are supposed get their books of accounts audited by a practicing Chartered Accountant: -

Any person pursuing business and whose total turnover or gross receipts exceed a sum of 2 crore rupees in any previous year (N.A applicable to the persons who opts for presumptive taxation scheme).
Any person pursuing profession and whose gross profits exceed fifty lakh rupees in any previous year.
A person who is considered eligible for the presumptive taxation scheme, and who claims that the profits and gains for the respective business is lower than what is computed in accordance with the presumptive taxation scheme and his/her income exceeds the amount that is taxable. This provision is applicable to the taxpayers who opt for presumptive taxation scheme other than the one who choose the scheme under Section 44AD and whose sale or turnover is limited to Rs 2 crores.

Tax Audit under Section 44AB

The tax audit report must be prepared by the authorized Chartered Accountant in the prescribed forms. The audit report should contain the findings, observations; etc.
The audit report must be prepared in Form 3CB and the particulars of the audit should be reported in Form 3CD.
Tax audit reports for those persons who are necessitated to get their accounts audited by or under any other law must be prepared in Form 3CA/ 3CB and the particulars for the same must be reported in Form 3CD.
The tax audit report must be electronically filed by the chartered accountant, after which the taxpayer is required to approve the submitted reports using the e-filing account.