TAX AUDIT APPLICABILITY & PENALTIES FOR AY 2023-24

Professionals:

• If the gross receipts of a professional exceed Rs. 75 lakhs, then a tax audit is required.

• If a professional is eligible for the presumptive taxation scheme under Section 44DA, and claims a profit below the prescribed limit, then a tax audit is required.

Other entities:

• Entities that are registered under Section 10(23C) of the Income Tax Act, 1961, and whose annual receipts exceed Rs. 5 crore, require the services of a statutory audit firm.

Please note that these are the general applicability criteria. There may be other circumstances that may require a tax audit, such as if a taxpayer is involved in a high-risk business or if the taxpayer has been under investigation by the tax authorities.

If you are unsure whether you are required to have a tax audit, you should consult with a chartered accountant.

The penalty for non-compliance with tax audit is as follows:

For businesses:

• If the gross receipts or turnover of a business exceeds Rs. 1 crore, and the taxpayer fails to get the accounts audited, then a penalty of 0.5% of the total sales, turnover or gross receipts, or Rs. 1,50,000, whichever is less, will be levied.

• If the gross receipts or turnover of a business exceeds Rs. 10 crores, but is less than Rs. 50 crores, and the percentage of cash transactions is less than 5%, and the taxpayer fails to get the accounts audited, then a penalty of 0.5% of the total sales, turnover or gross receipts, or Rs. 75,000, whichever is less, will be levied.

• If the gross receipts or turnover of a business exceeds Rs. 50 crores, regardless of the percentage of cash transactions, and the taxpayer fails to get the accounts audited, then a penalty of 0.5% of the total sales, turnover or gross receipts, or Rs. 1,50,000, whichever is less, will be levied.

For professionals:

• If the gross receipts of a professional exceed Rs. 75 lakhs, and the taxpayer fails to get the accounts audited, then a penalty of 0.5% of the total gross receipts, or Rs. 75,000, whichever is less, will be levied.

• If a professional is eligible for the presumptive taxation scheme under Section 44DA, and claims a profit below the prescribed limit, and the taxpayer fails to get the accounts audited, then a penalty of 0.5% of the total gross receipts, or Rs. 37,500, whichever is less, will be levied.

The penalty for non-compliance with tax audit is a serious matter. If you are unsure whether you are required to have a tax audit, you should consult with a chartered accountant.