Tax Audit Applicability and Due Date 2025

Tax audits play a vital role in every nation’s taxation system to ensure business and individual compliance with tax laws. The tax audit rules are framed under the Income Tax Act in India and are meant to detect discrepancies, prevent tax evasion, and maintain the transparency of the financial records of taxpayers. In this blog, we will be looking into what a tax audit is, who requires it, the mechanism, and the important due dates involved.

What is a Tax Audit?

A tax audit is a process in which a qualified professional examines the financial statements, books of accounts, and tax returns of a taxpayer (individual or business) through a chartered accountant (CA). An audit is the process of reviewing the income and expenses of a taxpayer to ensure compliance with tax laws and that the correct amount of tax has been paid.

In India, certain categories of taxpayers are required to get a tax audit done under section 44AB of the Income Tax Act. It makes sure that businesses and individuals are keeping up their books in accordance with the tax legislative acts and reporting their incomes correctly.

Due Dates for Tax Audit

The complexity of the taxpayer determines the date for the tax audits in India, which is mentioned under the Income Tax Act.

1. General Due Date:

In general, the due date for filing the tax audit report for most businesses and professionals is September 30 of the assessment year. This means the tax audit for the financial year 2024-25 will have to be filed, and the tax audit needs to be completed by September 30, 2025.

2. Extended Due Dates:

In special cases like any calamity or public emergency, the government may extend the due date for filing the tax audit. In some cases, the due date could be extended for weeks or months.

3. For Companies:

All companies, irrespective of size or turnover, are required to submit their tax audit report by a deadline of 30th September of the respective assessment year. The audit for the fiscal year ending 31st March 2025 will be required to be done by 30th September 2025.

4. Revised Returns:

If any discrepancy or error is found after filing the return, a taxpayer can file the fatal return within 12 months from the end of the assessment year. Nonetheless, the original due date should still be used to file the tax audit report.

Applicability of Tax Audit

Categories of taxpayers required to undertake a tax audit are specified under the Income Tax Act. As mentioned above but not least, one of the reasons for a tax audit ΕB serves for a business type as well as the turnover or income level. Let’s break it down further:

1. Business Entities

Turnover Criteria: According to section 44AB of Income tax, any person (other than a company), who is carrying on business, should get their accounts audited if their total turnover or gross receipts of the business are more than ₹1 crore more in a financial year. But, for the assessment year 2020-21 onwards, this limit is being enhanced to ₹10 crore if cash receipts and payments of the business are to the extent of less than 5% of total receipts and payments.

Professionals (Section 44AA): Professionals: Doctors, lawyers, accountants, etc., whose gross receipts for a financial year exceed ₹50 lakh need to undergo a tax audit.

2. Taxable income of taxpayers choosing a Presumptive Taxation Scheme

In every presumptive taxation scheme available under the Income Tax Act for a taxpayer – under sections 44AD, 44ADA or 44AE – the requirement to conduct a tax audit does not apply if his/ her income is below a specific threshold limit. For instance, in the case of turnover of business being less than ₹2 crore, no tax audit is required under section 44AD.

3. Companies

All companies are required to get their accounts audited, irrespective of their turnover or gross receipts, thus covering even a private company or public company. This is because companies are separate legal entities as per the law, and taxes are audited to ensure compliance.

4. Limited Liability Partnerships (LLPs)

Tax audits are mandatory for LLPs having a turnover of more than ₹40 lakh or a capital contribution of more than ₹25 lakh.

5. Others

Tax Audit is not applicable to any taxpayer viz. Individuals, HUF, or others not covered under the above limit, if the Income Tax Department considers it necessary, then the Individual, HUF or the other entities may be liable for a tax audit.

Process of a Tax Audit

1. Chartered Accountant (CA) Appointment: The audit is carried out by a qualified CA. They should be registered under the Institute of Chartered Accountants of India (ICAI).
2. Review of Books of Accounts: The CA will also review the books of accounts maintained by the taxpayer, including income statements, balance sheets, ledgers, etc, to ensure the same are in line with the Income Tax Act.
3. Filling the Tax Audit Report: CA will fill the Tax Audit Report after the Audit. This involves verification of taxpayer keeping required records and complying with rules for taxation, etc.
4. Filing of Report: The income tax audit report has to be filed with the Income Tax Department along with the taxpayer’s income tax return.
5. Finalization: Upon submission of the report, the tax authorities can review the report and can raise queries if required. If all is well, the case is finished and the taxpayer receives a “clean bill of health.”

Consequences of Non-compliance

Taxpayers face serious consequences as a result of failing to perform a tax audit when necessary:

• Penalty: The Income Tax Department may penalize for non-filing of tax audit reports. The penalty will not exceed 0.5% of the total turnover or gross receipts of the business, subject to a minimum penalty of ₹1,50,000.
• Scrutiny: If a tax audit is not done/submitted on time as required under the act, then the case of the taxpayer might be selected for scrutiny by the Department itself, and further proceedings might be initiated, including penalties.
• Increased tax liability: This may lead to increased tax liability as the taxpayer would not be able to claim certain deductions or exemptions which are available under the Income Tax Act if they make a self-assessment through the audit process.

Conclusion

Tax audits are one of the key components of the tax system because they are aimed at verifying the compliance of businesses and professionals with the tax laws and the correctness of revenue and expense declarations. Taxpayers can save themselves from severe penalties and legal implications by working to suit a new gamer by being aware of when, why, and how tax audits are done. Please note that this is general information only, and you should research the current rules and seek the advice of a qualified professional, if needed, to ensure compliance with the tax laws.