Tax Audits
Ensure GST & Income Tax compliance through thorough audits.
Tax Audit Services by ClientsMaster
ClientsMaster provides expert Tax Audit Services, ensuring seamless compliance with Income Tax Act provisions while minimizing tax risks. Our team of Chartered Accountants (CAs) specializes in conducting tax audits, assisting businesses and professionals in fulfilling their obligations efficiently.
Our Tax Audit Solutions
Applicability & Compliance Advisory
Determining tax audit applicability under Sections 44AB, 44AD, and 44ADA.
Advising businesses and professionals on turnover thresholds and exemptions.
Ensuring compliance with financial reporting and tax regulations.
Tax Audit Report Preparation & Filing
Conducting a detailed audit of financial records as per Section 44AB.
Filing of Form 3CA/3CB and Form 3CD with accurate disclosures.
Identifying and rectifying discrepancies to ensure compliance.
Tax Audit for Businesses & Professionals
✅ For Businesses (Section 44AB & 44AD):
Tax audit mandatory if turnover exceeds ₹1 crore (or ₹10 crore for digital transactions).
Guidance on opting for presumptive taxation under Section 44AD to avoid audit.
Assistance in maintaining proper books of accounts.
✅ For Professionals (Section 44ADA):
Tax audit required if gross receipts exceed ₹50 lakh.
Advisory on presumptive taxation to simplify tax compliance.
Handling Tax Notices & Audit Queries
Assistance in responding to notices from the Income Tax Department.
Resolving TDS mismatches, Form 26AS discrepancies, and tax demands.
Representation before tax authorities in case of scrutiny.
Audit Exemptions & Tax Planning
Helping businesses opt for presumptive taxation schemes to avoid audits.
Structuring financial transactions to stay within audit exemption limits.
Advisory on digital payments to qualify for a ₹10 crore turnover threshold.
Why Choose ClientsMaster?
✔ Experienced Chartered Accountants ensuring accurate and hassle-free tax compliance.
✔ Proactive advisory to reduce tax audit risks and simplify taxation.
✔ Timely audit report filing to avoid penalties.
✔ Support for audit exemptions and strategic tax planning.
📞 For professional Tax Audit Services, reach out to ClientsMaster today!
Provisions Related to Tax Audit under Income Tax Act: Section 44AB, 44AD, 44ADA
A Tax Audit under Section 44AB of the Income Tax Act is required for businesses and professionals exceeding certain turnover or gross receipts limits. However, presumptive taxation under Sections 44AD & 44ADA helps taxpayers avoid tax audits under specific conditions.
1. Tax Audit under Section 44AB
Section 44AB of the Income Tax Act mandates a tax audit for certain categories of taxpayers to ensure compliance with tax laws and accurate maintenance of books of accounts.
Applicability of Tax Audit under Section 44AB
Category of Taxpayer | Criteria for Tax Audit |
Business (Normal Scheme) | If turnover exceeds ₹1 crore (₹10 crore if cash transactions are ≤5% of total receipts & payments). |
Professionals (Normal Scheme) | If gross receipts exceed ₹50 lakh. |
Business under Presumptive Taxation (44AD) | If turnover is below ₹3 crore but profit is less than 6%/8% and total income exceeds the basic exemption limit. |
Professionals under Presumptive Taxation (44ADA) | If gross receipts are up to ₹75 lakh but profit is less than 50%, and total income exceeds the basic exemption limit. |
Businesses where Presumptive Taxation was Opted & Later Opted Out (44AD(4)) | If a taxpayer uses 44AD but later opts out before 5 years, they must compulsorily get a tax audit done if their income exceeds the basic exemption limit. |
2. Presumptive Taxation Under Section 44AD (For Small Businesses)
Section 44AD provides relief to small businesses by allowing them to declare a minimum presumptive profit and avoid tax audit and detailed bookkeeping requirements.
Criteria | Details |
Eligible Taxpayers | Resident Individuals, HUFs, and Partnership Firms (Excludes LLPs and Companies). |
Turnover Limit | Up to ₹3 crore (if cash transactions ≤5% of total receipts & payments). Otherwise, ₹2 crore. |
Minimum Presumptive Profit | - 6% of turnover (for digital transactions). - 8% of turnover (for cash transactions). |
Tax Audit Requirement | Not required if declared profit is ≥6% /8% of turnover. |
Restriction on Opting Out (44AD(4)) | If a taxpayer opts out of the presumptive scheme after using it, they cannot opt back in for the next 5 years and may be subject to tax audit if income exceeds the exemption limit. |
Example: If a business with ₹1.8 crore turnover declares 6% digital profit (₹10.8 lakh), no tax audit is required. But if the business declares only 4% (₹7.2 lakh), a tax audit is required (if total income exceeds ₹3 lakh for individuals below 60 years).
3. Presumptive Taxation Under Section 44ADA (For Professionals)
Section 44ADA provides presumptive taxation benefits to professionals such as doctors, lawyers, architects, consultants, etc., to simplify tax compliance.
Criteria | Details |
Eligible Taxpayers | Resident Individuals and Partnership Firms (Excludes LLPs and Companies). |
Gross Receipts Limit | Up to ₹75 lakh. |
Minimum Presumptive Profit | 50% of gross receipts. |
Tax Audit Requirement | Not required if declared profit is ≥50% of gross receipts. |
Restriction on Opting Out | No 5-year restriction (unlike 44AD), but audit required if income is below 50% and total income exceeds the exemption limit. |
Example: If a professional earns ₹60 lakh and declares ₹30 lakh (50%) as profit, no tax audit is required. But if they declare only ₹25 lakh (42%), a tax audit is required if their total income exceeds ₹3 lakh (for individuals below 60 years).
4. Ways to Escape Tax Audit Legally
✅ For Businesses (Section 44AD):
Ensure turnover is within ₹3 crore (if cash transactions ≤5%).
Declare profit of at least 6% (digital) or 8% (cash).
Avoid opting out of 44AD within 5 years to prevent mandatory audit.
✅ For Professionals (Section 44ADA):
Ensure gross receipts are within ₹75 lakh.
Declare 50% or more of gross receipts as profit.
✅ For Regular Businesses (Not Under 44AD):
Keep cash transactions below 5% of total receipts and payments to qualify for a higher ₹10 crore audit threshold.
Structure finances to stay below ₹1 crore turnover if cash transactions exceed 5%.
5. Tax Audit Due Dates & Penalties
Category | Due Date for Tax Audit Report Filing | Penalty for Non-Compliance |
Businesses & Professionals under 44AB | 30th September of the assessment year | Lower of ₹1.5 lakh or 0.5% of turnover/gross receipts. |
Businesses & Professionals under 44AD/44ADA (If Audit Becomes Applicable) | 30th September of the assessment year | Lower of ₹1.5 lakh or 0.5% of turnover/gross receipts. |
6. Summary Table of Tax Audit Applicability & Escape Methods
Section | Applies To | Turnover/Gross Receipts Limit | Presumptive Profit % | Tax Audit Applicability |
44AB (Audit Requirement) | Businesses & Professionals | >₹1 crore (₹10 crore if cash transactions ≤5%) for businesses, >₹50 lakh for professionals | - | Mandatory if limits exceeded |
44AD (Presumptive Tax for Businesses) | Small businesses (Excludes LLPs & Companies) | ≤₹3 crore (if cash transactions ≤5%), else ₹2 crore | 6% (Digital) / 8% (Cash) | No audit if profit is ≥6%/8% |
44ADA (Presumptive Tax for Professionals) | Specified professionals (Individuals & Firms, Excludes LLPs & Companies) | ≤₹75 lakh | 50% | No audit if profit is ≥50% |
44AD(4) Restriction | Businesses opting out of 44AD | - | - | Audit mandatory for 5 years if opted out & income exceeds exemption limit |
Conclusion
Tax Audit under 44AB is mandatory for businesses and professionals exceeding the prescribed turnover/gross receipts limits.
Taxpayers under 44AD (businesses) & 44ADA (professionals) can escape tax audits if they declare minimum presumptive profit.
Businesses opting out of 44AD within 5 years are subject to compulsory tax audit if income exceeds the exemption limit.
Maintaining digital transactions (≤5%) can extend the audit threshold to ₹10 crore for businesses.
For professional Tax Audit & Compliance Services, contact ClientsMaster today!