The due date to file the ITR for individuals opting for tax audit has been extended from 31st October 2024 to 15th November 2024 for AY 24-25.
If you run a business or earn professional income, you’ll likely have numerous transactions, both for payments received and expenses incurred. To accurately track and record these transactions, you will need to maintain detailed financial statements and accounts.
Now in certain cases, the Income Tax Department (ITD) requires a thorough examination of these accounts to verify that they are accurately maintained and that the expenses claimed are legitimate.
This is exactly what a tax audit is.
Who conducts a tax audit?
A tax audit is carried out by a Chartered Accountant (CA), who ensures that the books of accounts and financial statements are properly maintained. The CA then includes their observations and other necessary details in the tax audit report.
Applicability of tax audit
The applicability of a tax audit depends on the turnover, sales, or gross receipts from a business or profession, along with a few specific conditions.
a) For businesses
The primary criterion is that the business turnover exceeds ₹1 crore. However, to encourage cashless transactions, the government has increased the audit threshold to ₹10 crore for businesses where more than 95% of transactions are digital.
Here’s a table to sum it up.
b) For professionals
For professionals, both turnover and profit reported are key in determining tax audit applicability.
Additionally, businesses and professionals may choose to opt for the presumptive taxation scheme, where tax audit applicability rules become a little different.
-
For businesses under presumptive taxation (u/s 44AD): A tax audit becomes mandatory if they opt out of the scheme before completing 5 years. In such cases, tax audit is required for the next 5 financial years including the year in which they opt out.
-
For professionals under presumptive taxation (u/s 44ADA): They can opt for the presumptive taxation scheme if gross receipts don’t exceed ₹75 lakh (this limit is ₹50 lakh if more than 5% of transactions are in cash). And in this case, a tax audit is not required unless they opt out of the presumptive scheme and satisfy the above listed audit conditions as in case of a normal profession.
A tax audit is not required if total income is below the basic exemption limit.
What are the consequences of not conducting a tax audit?
If you miss the due date for filing the tax audit report, a penalty of 0.5% of turnover or gross receipts, or ₹1.5L, whichever is lower, may be imposed by the assessing officer.
Further, if you file your ITR without an audit, the return will be considered defective and a notice will be issued u/s 139(9).
Important deadlines
For taxpayers required to undergo a tax audit, the due date for filing the audit report is 30th September, and the deadline for filing the ITR is 31st October of the relevant assessment year.
Here’s a video that answers everything about tax audits.
