Section 44AB Conditions
Every person trying to do business must have his accounts audited in accordance with section 44AB of the Act if his total sales, turnover, or gross receipts in business exceed or surpass one crore rupees in any prior year. If a person’s gross income from their profession exceeded Rs. 50 lakhs in any prior year, they were compelled to have their accounts audited. With the passage of the Finance Act 2020, the threshold limit for a person conducting business was raised from one crore rupees to five crore rupees in situations where:
- The total of all cash receipts for the prior year does not exceed 5% of such receipt; (ii) the total of all cash payments for the prior year does not exceed 5% of such payment.
- It is suggested to raise the barrier from five crore rupees to 10 crore rupees in circumstances specified above in order to encourage non-cash transactions, boost the digital economy, and further lessen small and medium enterprises’ compliance burden.
Section 44AB Limits
It should be noted that where the assessee is covered by section 44AB, he must have the books of accounts audited by a Chartered Accountant if total income exceeds the basic exemption limit.
- The tax audit report should be submitted in Form 3CB CD, where the tax audit report completed by the chartered accountant is to be submitted in Form No. 3CB and the audit’s specifics are to be recorded in Form No. 3CD.
- If the assessee is subject to tax audit and he neglects to undertake an audit of the books of accounts, he may be subject to one of the following two penalties:
- 0.5% of the turnover or gross receipts, or
- Rs. 1,50,000.