Tax audit means, auditing of your books of accounts from full time practicing Chartered accountant (Reference to section 44AB of income-tax Act)

The main purpose of this tax-audit is, to verify in detail and report the accurate financial information to Government / tax department.

Threshold limit to make Tax Audit compulsory for the financial year 2020-21

The turnover threshold limit for tax audit is Rs.10 Crore where the business is carrying is receipts and payments are more than 95% in digital mode.

The business transaction in cash mode is more than 5%, than the threshold limit for Tax audit is 1 Cr.

How to calculate this 5% Cash limit?

The below transactions are considered as Cash transactions:

1. Cash Receipt from Customers
2. Cash Loan
3. Advance received (from customers) in cash
4. Cash investment by directors/ partners
5. Cash sale of fixed assets
6. Cash payment to suppliers, vendors
7. Repayment of loan by cash
8. Cash advance to suppliers
9. Cash settlement to directors/ partners
10. Cash payment for purchase of capital goods.

Below are NOT considered as Cash transactions.

1. Cash withdrawal from Bank
2. Cash deposit into Bank

So, all the above cases, if the Cash limit is within the 5% limit, then no tax audit attracts for the business turnover up-to 10 Crore, else tax audit attracts.

Types of Tax Audit Report

3CA

Applicability of 3CA, for business who are required to conduct Audit under Companies Act, statutory Audit, (except Income-tax Act)

3CB

Applicability of 3CB, is for Income-tax Audit, where business turnover carrying in cash for more then 5%, as per IT provisions.

 3CD

It’s a statement of details provided in the format of 3CD, where tax audit report applies and this need to be certified from Practicing CA.

 3CE

It’s a applicable to non-residents and Foreign companies, where they receive for royalty, technical fee, professional fee etc.,

Due date of filing Tax audit FY 2020-21

Tax audit cases due date: 30/Nov/2021

Belated revised return can be filed upto: 31/Jan/2022

Compulsory maintenance of books for  tax audit

• Cash book, Bank records
• Journal as per books of accounts in systematically
• Ledgers – Sales, purchase, stock etc
• Bills, receipts

Penalty for Non filing tax audit report

Where, the tax audit filing is mandatory cases; but fails to file, then the penalty attracts at 0.5% of the total turnover or Rs.1,50,000 whichever is minimum.