Income tax audit

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FAQs+on+Tax+Audit

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you can find all the details regarding to Tax Audit Section 44 at our blog post and also you can file your income tax return with our online CA-assisted itr filing service at itr filing portal.

Certainly! Let’s delve into the provisions related to tax audit under Sections 44AA, 44AB, and 44AD of the Income Tax Act, 1961:

1. Section 44AA:

   • This section pertains to the maintenance of books of accounts by certain taxpayers.
   • It specifies that if an individual or a Hindu Undivided Family (HUF) is engaged in a profession, they must maintain proper books of accounts.
   • Additionally, if their income exceeds the maximum amount not chargeable to income tax, they are required to get these accounts audited under Section 44AB.
   • For instance, if a professional’s income is deemed to be the profits and gains under Section 44ADA (which prescribes presumptive taxation for professionals), and they claim income lower than the deemed profits, audit becomes mandatory.

2. Section 44AB:

   • This section deals with tax audit and applies to specific categories of taxpayers.
   • Under clause (d) of Section 44AB:
     • Professionals who fall under the provisions of Section 44ADA (presumptive taxation) and claim income lower than the deemed profits must maintain books of accounts.
     • If their income exceeds the maximum non-taxable amount, they are required to get these accounts audited.
   • Under clause (e) of Section 44AB:
     • Businesses are subject to audit if the provisions of Section 44AD apply to them.
     • Section 44AD provides for presumptive taxation for businesses.
     • If a business’s income exceeds the maximum non-taxable amount, audit becomes mandatory.

3. Section 44AD:

   • This section deals with presumptive taxation for businesses.
   • Eligible taxpayers can declare profits based on a presumed percentage of their gross receipts.
   • However, if they declare profits differently from the prescribed percentage for five consecutive assessment years, they lose eligibility for this section.
   • If an eligible taxpayer’s income exceeds the maximum non-taxable amount, they must maintain books of accounts and get them audited under Section 44AB.

In summary, tax audit is a process of verifying and inspecting a taxpayer’s accounts to ensure compliance with the Income Tax Act.