Tax Audit

A tax audit is mandatory for businesses and professionals when their turnover, gross receipts, or profits exceed the thresholds specified under Section 44AB of the Income Tax Act, 1961. For businesses: if total sales/turnover exceeds ₹1 crore (or ₹10 crore if cash receipts are less than 5% and aggregate payments to persons less than 5% of total receipts), a tax audit is compulsory. For professionals: if gross receipts exceed ₹75 lakh, an audit is required. The tax auditor is appointed by the assessee before October 31 of the relevant assessment year and must submit Form 3CB along with Form 3CD (the detailed statement of particulars). The audit ensures books are properly maintained, comply with accounting standards, and all prescribed particulars are disclosed. A tax audit does not certify correctness of every entry — it certifies the books give a true and fair view. Penalties for non-compliance: ₹1,50,000 or 0.5% of turnover, whichever is less.