Understanding Tax Audits under Section 44AB
A tax audit is a mandatory examination of a business’s accounts by a Chartered Accountant. The goal is to ensure that books of account are properly maintained and true income is computed.
Applicability
For businesses, a tax audit is generally required if the total sales, turnover, or gross receipts exceed 1 Crore in a financial year. However, this limit is increased to 10 Crores if cash transactions (both receipts and payments) do not exceed 5% of total transactions.
Failure to comply with tax audit requirements can result in a penalty of 0.5% of total sales/turnover, subject to a maximum of Rs. 1.5 Lakhs.
