Income Tax Audit

Last Updated at: Dec 22, 2020
Income Tax Audit
The Finance Ministry has recently announced that the Income-tax e-filing portal has completed its integration with the ICAI portal for validation of Unique Document Identification Number (UDIN). The UDIN is generated from the ICAI portal by the Chartered Accountants for documents certified/attested by them. UDIN generation is made mandatory for every kind of certificate/Income-tax audit report made by ICAI members as required by various regulators.


The requirements for an Income Tax Audit are incorporated under section 44AB of the Income Tax Act of 1961. The Income Tax audit is an analysis of an individual’s or organisation’s tax records by any external agency to confirm that all the revenue, expense and refund data are listed correctly. Further, tax audits are mandatory by the Income Tax Act that states that all taxpayers are expected to get the accounts of their company or organisation examined according to the requirement of the act.

Moreover, under section 44AB, the audit aims to determine the factual veracity of statements filed and the completion of other conditions as per the relevant rules. Moreover, the Chartered Accountant working on the tax audit has to offer all their findings and observations in the form of an audit report. Therefore, The audit report is provided as per format usable in the form numbers 3CA/3CB and 3CD.

Requirements of tax audit

Tax audit is managed to complete the following requirements:

  • Assure proper support and accuracy of books of accounts and certification of the corresponding by a tax auditor
  • Further, Summarizing observations/inconsistencies written by tax auditor after a systematic review of the books of account
  • Additionally, to report prescribed data such as tax reduction, agreement of various requirements of income tax law etc.
  • Moreover, all these allow tax authorities in checking the accuracy of income tax returns registered by the taxpayer. Calculation and confirmation of total income, claim for deductions etc. also fits easier.

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When and how a tax audit report shall be provided?

The tax auditor shall provide a tax audit report online by using their login details in the range of ‘Chartered Accountant’. Further, the taxpayers shall also add CA features in their login portal. Once the tax auditor finishes the audit report, the same should either be allowed or denied by the taxpayer in their login portal. If refused for any purpose, all the methods need to be replaced and followed again till the audit report is received by the taxpayer.

You must register the tax audit report on or before the scheduled date of filing the return of income. It is November 30 of the following year in case the taxpayer has enrolled into an international business and 30 September (increased to 31 October for Annual Year 2020-21) of the subsequent year for other taxpayers.

Who is compulsorily subject to a tax audit?

A taxpayer is expected to have a tax audit carried out if the businesses or sales, turnover or gross acquisitions of business exceed Rs 1 crore in the financial year. However, a taxpayer may be expected to get their records reviewed in certain other conditions. 

Here are the various categories of taxpayers below


Category of person Threshold
Carrying on sales or business(not opting for possible taxation scheme*) Complete sales, turnover or total intakes exceed Rs 1 crore in the FY
Carrying on business valid for possible taxation under Section 44AE, 44BB or 44BBB Claims profit lower than the selected limit under possible taxation scheme
First, Carrying on business suitable for assumptive taxation under Section 44AD States taxable income below the purposes directed under the presumptive tax system and has income surpassing the basic threshold limit
Carrying on the business and is not suitable to maintain presumptive taxation under Section 44AD due to choosing out for possible taxation in any one FY of the lock-in period  If income exceeds the highest amount not liable to tax in the following 5 consecutive tax years from the FY (financial year) when the presumptive taxation was not chosen for.
Carrying on business which is reporting gains as per presumptive taxation system under Section 44AD If the entire sales, gross receipts do not exceed Rs 2 crore in the FY, then tax audit will not pertain to such companies.


Taxpayers on Profession

Category of person Threshold
Similarly, Carrying on the profession  Further, Complete gross receipts top Rs 50 lakh in the Financial Year 
Carrying on the business available for presumptive tax under Section 44ADA
  1. Calls profits or gains lower than the prescribed idea under the presumptive taxation system
  2. Income tops the maximum amount not liable to income tax


Business Loss

Category of person Threshold
In case of loss from carrying on of business and not selecting for presumptive taxation system Moreover, Complete sales, turnover receipts exceed Rs 1 crore
Additionally, if a taxpayer’s entire income exceeds the primary threshold limit but he has acquired a loss from carrying on a business  In the state of loss from business when sales or purchases, gross receipts exceed 1 crore. Further, the taxpayer is directed to tax audit under 44AB
Carrying on business (opting presumptive taxation scheme under section 44AD). Further, holding a business loss but with income under the necessary threshold limit Moreover, Tax audit not applicable
Carrying on business (presumptive tax scheme under section 44AD suitable) and having a company or business loss but with income exceeding the basic threshold boundary States assessable income under the goals guided under the presumptive tax scheme and has income passing the necessary threshold limit